Karnataka High Court
Surana Pharmaceuticals Pvt. Ltd. vs Commissioner Of Income-Tax on 1 October, 1999
Equivalent citations: [2000]243ITR218(KAR), [2000]243ITR218(KARN)
JUDGMENT V.K. Singhal, J.
1. At the instance of the assessee, the Income-tax Appellate, Tribunal has referred the following question of law arising out of its order dated November 4, 1996, in respect of the assessment year 1991-92 under Section 256(1) of the Income-tax Act, 1961 :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the applicant was not entitled to claim depreciation on the house property held by it in Bombay which was acquired through acquisition of shares in a co-operative society, where registration under the Registration Act was not required ?"
2. The facts of the case are that the assessee purchased the house property at Bombay on which depreciation was claimed. The property was purchased without there being any sale deed registered in favour of the asses-see, though the value exceeded Rs, 100, According to the Assessing Officer depreciation under Section 32 could be claimed only by the owner and as the sale deed had not been registered, the claim of the assessee was rejected relying on the decision given by this court in the case of CIT v. Bharat Gold Mines Ltd. [1991] 192 ITR 639. The first appeal and the appeal before the Tribunal were rejected.
3. The case of the assessee is that the property was purchased in the nature of a flat at Bombay from a co-operative society by acquiring the shares and the shares were transferred in favour of the assessee. It is submitted that the ownership of the property has vested by acquiring a share in the co-operative society and the registration of any sale deed was not at all necessary. According to Section 2(47)(vi) of the Income-tax Act, 1961, "transfer" in relation to the capital asset includes any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or in any other manner whatsoever). This has the effect of transferring or enabling the enjoyment of immovable property. It is submitted that since the shares in the co-operative society were obtained and the assessee was able to enjoy such immovable property he should be considered to be an owner and the property from the co-operative society must be deemed to have been transferred to the assessee. The Tribunal held that in the eyes of law, it is the co-operative society alone which holds the property and the members thereof merely being holders of shares in the co-operative society are entitled to possession and enjoyment and not to ownership. Since the assessee was able to enjoy the property it can be only by way of transfer of the property as contemplated by Section 2(47)(vi) of the Act and, therefore, the depreciation should have been allowed.
4. Arguments of both learned counsel for the parties heard. The matter now stands concluded by the decision given in the case of Mysore Minerals Ltd.v. CIT it was held that (page 780, 781):
"Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property ... in his own right would be the owner of the buildings for the purpose of Section 32(1) though a formal deed of title may not have been executed and registered ... assessee having paid part of the price, has been placed in possession of the houses as an owner and is using the buildings for the purpose of its business."
5. In view of the law laid down by the apex court, we are of the view that the Income-tax Appellate Tribunal was not justified in holding that the appellant was not entitled to claim depreciation on the house which was acquired through acquisition of shares in a co-operative society, where registration under the Registration Act was not required. Accordingly, the reference is answered in favour of the assessee and against the Revenue.
6. Sri G. Sarangan, learned counsel is permitted to file vakalath in two weeks.