OWNER, BENEFICIAL OWNER |
Partnership Firms ID – 07 (JBC-020) |
Meaning of the word Owned, Owner, and Ownership for the purpose of section 32.
Beneficial owner
The assessee was a private limited company. During the year the assessee had purchased for the use of its staff seven low income group houses from the Housing Board. The assessee had made part payment and was in turn given allotment of the houses followed by delivery of possession by the Housing Board. The actual deed of conveyance was not yet executed by the Housing Board in favour of the assessee. The assessee made a claim under section 32 of the Act in respect of depreciation of buildings used for the purpose of the business of the assessee. Finding of fact arrived at in the case at hand was that though a document of title was not executed by the Housing Board in favour of the assessee, the houses were allotted to the assessee by the Housing Board, part payment received and possession delivered so as to confer dominion over the property on the assessee where after the assessee had in its own right allotted the quarters to the staff and they were being actually used by the staff of the assessee. The assessee was entitled to depreciation in respect of the seven houses in respect of which the assessee had not obtained a deed of conveyance from the vendor although it had taken possession and made part payment of the consideration.
Section 32 of the Act allows certain deductions, one of them being depreciation of buildings, etc., owned by the assessee and used for the purposes of the business or profession. The terms ‘‘own’’, ‘‘ownership’’ and ‘‘owned’’ are generic and relative terms. They have a wide and also a narrow connotation. The term owned as occurring in section 32(1) of the Income-tax Act must be assigned a wider meaning. Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the building though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. ‘‘Building owned by the assessee’’, the expression as occurring in section 32(1) of the Income-tax Act, means the person who having acquired possession over the building in his own right uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirements of laws such as the Transfer of Property Act and the Registration Act, etc. Generally speaking depreciation is an allowance for the diminution in the value due to wear and tear of a capital asset employed by an assessee in his business. The very concept of depreciation suggests that the tax benefit on account of depreciation legitimately belongs to one who has invested in the capital asset and is utilising the capital asset and thereby losing gradually the investment caused by wear and tear, and would need to replace the same by having lost its value fully over a period of time. It is well-settled that there cannot be two owners of the property simultaneously and in the same sense of the term. The intention of the Legislature in enacting section 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time-being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession. Assigning any different meaning would not subserve the legislative intent. [1999] 239 ITR 0775W Mysore Minerals Ltd. vs. Commissioner of Income-tax (Supreme Court of India) It is now well settled law that depreciation is to be allowed to the one who has invested in the capital asset and is utilizing the capital asset. Further, there are several judicial decisions to support the view that registration of a vehicle in own name is not necessary for claiming depreciation. In the case of lease transactions it is not necessary that the commercial assets should be put to use and worked by the owner himself. Even if a licensee or a hirer works the assets, depreciation is allowable to the lessor- CIT v. Sarveshwar Nath Nigam [1963] 48 ITR 853 (Punj).
[1999] 239 ITR 0775 [Supreme Court of India] Mysore Minerals Ltd. v.Commissioner of Income-tax
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 and/or to enjoy its usufruct in his own right would be the owner of the building though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. ‘‘Build-ing owned by the assessee’’, the expression as occurring in section 32(1) of the Income-tax Act, means the person who having acquired possession over the building in his own right uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirements of laws such as the Transfer of Property Act and the Registration Act, etc.
Section 32 of the Act allows certain deductions, one of them being depreciation of buildings, etc., owned by the assessee and used for the purposes of the business or profession. The terms ‘‘own’’, ‘‘ownership’’ and ‘‘owned’’ are generic and relative terms. They have a wide and also a narrow connotation.
Generally speaking depreciation is an allowance for the diminution in the value due to wear and tear of a capital asset employed by an assessee in his business.
The very concept of depreciation suggests that the tax benefit on account of depreciation legitimately belongs to one who has invested in the capital asset and is utilising the capital asset and thereby losing gradually the investment caused by wear and tear, and would need to replace the same by having lost its value fully over a period of time.
It is well-settled that there cannot be two owners of the property simultaneously and in the same sense of the term. The intention of the Legislature in enacting section 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time-being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession. Assigning any different meaning would not subserve the legislative intent.
Conclusion :
wide meaning must be given to the word owner under section 32. If assessee is in possession of building on part payment of price and building is not registered in name of assessee. Assessee is to be regarded as owner of building for purposes of section 32 and is entitled to depreciation on it.