Income Tax Appellate Tribunal - Madras
Deputy Commissioner Of Income-Tax vs Thanthai Periyar Transport Corpn. Ltd. on 24 May, 1995
Equivalent citations: [1995]54ITD667(MAD)
ORDER
T.V.K. Nataraja Chandran, Senior VicePresident
1. This is an appeal by the revenue which is directed against the order of the CIT (Appeals) dated 27-12-1988 wherein he held that depreciation on buildings claimed by the assessee but disallowed by the Assessing Officer is to be allowed because the title deeds in respect of lands and buildings in question have already been passed on to the assessee with effect from 16-1-1975 right from its inception and necessary changes have been effected in the revenue records to that effect as per G.O. Ms. No. 1402 Transport Dept. dated 10-9-1979 with the result the assessee has become the owner of the lands and buildings in question. He has also relied upon the order of the Tribunal for earlier years and the decision of the CIT (Appeals) relating to the assessment years 1983-84 and 1984-85. Accordingly, he directed the Assessing Officer to allow depreciation on 'B' class buildings in accordance with the provisions of law.
2. The revenue has taken grounds to urge that the decision of the CIT (Appeals) is contrary to law and facts of the case. He erred in allowing depreciation on building without registered document. It was also urged that the decision of the Madras High Court in the case of CIT v. Tamil Nadu Agro Industries Corporation Ltd. [1987] 163 ITR 61 should have been followed and upheld the order of the Assessing Officer.
3. The assessee is a State Government undertaking and the main object of the assessee is to operate road transport service. While computing the income for the assessment year 1985-86, for which the accounting year ended on 31 -3-1985, the Assessing Officer, inter alia, disallowed depreciation of Rs. 36,480 out of total depreciation claimed on the basis of order of the earlier year. It appears that the Corporation came into being with effect from 16-1-1975 and as per Government's order Ms. No. 1402 Transport Dept. dated 10-9-1979 the title deeds in respect of lands and buildings in question had been passed on to this Corporation with effect from that date and necessary changes have been effected in the revenue records to the effect that it is the owner of the land and buildings in question. Presumably the Assessing Officer was under the impression that the said land and buildings have not been registered in the name of the assessee and hence it has not become the owner thereof though the assets were used for the purpose of business. Hence the depreciation pertaining to these properties was disallowed.
4. The CIT (Appeals) followed the earlier decision of the Tribunal relating to earlier assessment years and also the decision of the CIT (Appeals) pertaining to the assessment years 1983-84 and 1984-85 wherein direction to allow depreciation on the land and buildings was given by the Tribunal and the CIT (Appeals).
5. At the time of hearing the learned departmental representative reiterated the grounds taken by the revenue and relied heavily on the judgment of the Madras High Court in the case of Tamil Nadu Agro Industries Corporation Ltd. {supra). The learned counsel for the assessee, on the other hand, relied on the later judgment of the Madras High Court in the case of CITv. Tamil Nadu Small Industries Development Corporation Ltd. [1991] 190 ITR 655 and also the decision of the Tribunal in IT Appeal Nos. 2556 and 2557/Mds/88 relating assessment years 1983-84 and 1984-85 dated 23-4-1992. His contention was that in the case of Tamil Nadu Agro Industries Corporation Ltd. (supra) the transfer of immovable properties took place between two corporations, viz., Tamil Nadu Agro Industries Corporation Ltd. and Neyveli Lignite Corporation. In that case the Tamil Nadu Agro Industries Corporation Ltd. (supra) purchased a land from Neyveli Lignite Corporation and paid the entire consideration in October 1970 and was put in possession of the building in November 1970. In March 1975 the deed of sale was executed in respect of the building by the Neyveli Lignite Corporation in favour of the assessee. The assessee claimed depreciation in respect of the building in the assessment year 1973-74 but the ITO rejected the claim. The Tribunal, however, held that in view of Section 47 of the Registration Act, the assessee was entitled to the allowance. On reference, the High Court held that the interpretation of Section 47 of the Registration Act given by the Tribunal was erroneous. In that case, the terms of sale deed indicated that the parties intended the sale to be operative and effective only from March 1975 and not from any anterior point of time. This was also the effect of Section 47 of the Registration Act. The assessee was not the legal owner of the building in the assessment year 1973-74 and was not entitled to depreciation in respect of the building in that year. In view of this finding, there is no room to hold that the Tamil Nadu Agro Industries Corporation Ltd. became the owner of the property prior to 22-3-1975 so as to be eligible for depreciation.
6. In the case of Tamil Nadu Small Industries Development Corporation Ltd. (supra) by Government Order Ms. No. 1899 dated 24-8-1970 three raw material depots at Guindy, Madurai and Coimbatore were transferred by the Govt. of Tamil Nadu to the control of the assessee for Rs. 59,74,000. The consideration was paid and the assessee was put in possession of the raw material depots. The Tribunal held that the provisions of Transfer of Property Act would not apply to the transfer made by the Government of Tamil Nadu in favour of the assessee in view of Section 2 of the Government Grants Act, 1895 and no registered conveyance was required for effecting the transfer in favour of the assessee and the assessee being the owner of the three raw material depots was entitled to depreciation claimed. On reference by the Revenue the High Court upheld the interpretation given by the Tribunal and distinguished the facts of the case from the case of Tamil Nadu Agro Indus tires Corporation Ltd. (supra). In particular the Madras High Court pointed out that the phrase "other transfer" used in Section 2 of the Government Grants Act, 1895 would take in all forms of transfer of land or interest therein made by the Government for consideration and it is not restricted only to grants and the words are wide enough to cover the present transfer of three raw material depots made by the Government of Tamil Nadu to the assessee for consideration. Therefore, the High Court held that the Government Grants Act, 1895 is applicable to such transfer made by the Government of Tamil Nadu in favour of the assessee in G.O. Ms. No. 1899 dated 24-8-1970. Similar was the decision by the Rajasthan High Court in the case of Champa Lal v. RameshwarMR 1967 Raj. 233. Finally the Supreme Court in the case of Express Newspapers (P.) Ltd v. Union of India AIR 1986 SC 872 held that it is plain upon its terms that Section 2 of the Government Grants Act, 1895, excludes the operation of the Transfer of Property Act, 1882, to Government grants. In view of later decision of the Madras High Court and the ratio of the Supreme Court decision in the case of Express Newspapers (P.) Ltd. (supra) the Transfer of Property Act, 1882 is not applicable to the grants made by the Govt. of Tamil Nadu under Government Grants Act, 1895. Thus the assessee in that case was held to be eligible for depreciation even though registered sale deed was not executed for the property transferred. This decision made all the difference between the case of TamilNadu SmalllndustriesDevelopment Corporation Ltd. (supra) and the Tamil Nadu Agro Industries Corporation Ltd. (supra). Further in the case of Tamil Nadu Agro Industries Corporation Ltd. (supra) the Government of Tamil Nadu by G.O. Ms. No. 2345 Industries Department dated 11 -11 -1970 granted permission to the Neyveli Lignite Corporation to sell "lignite House" to the assessee subject to certain conditions. Therefore, that order of the Government could not be treated as a grant under Section 2 of the Government Grants Act, 1895 so as to exclude the transfer from the purview of Transfer of Property Act, 1882.
7. On these facts and circumstances of the case, we uphold the decision of the CIT (Appeals) and reject the grounds taken by the revenue.
8. In the result, the appeal is dismissed.