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Commissioner of Income-tax Vs. Hindustan Cold Storage and Refrigeration P. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberIncome-tax Reference No. 11 of 1969
Judge
Reported in[1976]103ITR455(Delhi)
ActsIncome Tax Act, 1922 - Sections 10(2); Income Tax Act, 1961 - Sections 32(1)
AppellantCommissioner of Income-tax
RespondentHindustan Cold Storage and Refrigeration P. Ltd.
Appellant Advocate B.N. Kirpal, Adv
Respondent Advocate K.K. Mehra, Adv.
Cases Referred and Alapati Venkataramiah v. Commissioner of Income
Excerpt:
direct taxation - depreciation - section 10 (2) of income tax act, 1922 and section 32 (1) of income tax act, 1961 - whether assessed-company entitled to claim depreciation under section 10 (2) (vi) in respect of assets of flour mill - income-tax officer disallowed claim of assessed on ground that assessed-company not owner as no sale deed executed - said flour mill constituted immovable property title of which would not pass to assessed in absence of registered sale deed - no sale deed executed in favor of assessed-company during assessment year under reference - condition under section 10 (2) (vi) not satisfied - assessed-company not entitled to claim depreciation in respect of flour mill. - - under the lease, the lessees were to do the necessary repairs and to hand back the mills.....m.r.a. ansari, j.1. the income-tax appellate tribunal, delhi bench-c (hereinafter referred to as 'the tribunal'), has referred the following question under section 66(1) of the indian income-tax act, 1922 (hereinafter referred to as 'the act '):'whether, on the facts and circumstances of the case, the assessed-company is entitled to claim depreciation under section 10(2)(vi) of the indian income-tax act, 1922, in respect of building, machinery and plant of the crown flour mills, delhi ?' 2. m/s. hindustan cold storage and refrigeration (p.) ltd., delhi (hereinafter referred to as 'the assessed-company'), is a subsidiary of m/s. meatles ltd., delhi, which is a private limited company incorporated under the indian companies act. m/s. meatles ltd. originally carried on two distinct.....
Judgment:

M.R.A. Ansari, J.

1. The Income-tax Appellate Tribunal, Delhi Bench-C (hereinafter referred to as 'the Tribunal'), has referred the following question under Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as 'the Act '):

'Whether, on the facts and circumstances of the case, the assessed-company is entitled to claim depreciation under Section 10(2)(vi) of the Indian Income-tax Act, 1922, in respect of building, machinery and plant of the Crown Flour Mills, Delhi ?'

2. M/s. Hindustan Cold Storage and Refrigeration (P.) Ltd., Delhi (hereinafter referred to as 'the assessed-company'), is a subsidiary of M/s. Meatles Ltd., Delhi, which is a private limited company incorporated under the Indian Companies Act. M/s. Meatles Ltd. originally carried on two distinct businesses, namely :

(i) the business of speculation in shares and other commodities, and (ii) the business of flour milling in its factory known as Crown Flour Mills.

3. As it was incurring losses in its speculation business since a number of years and as the profits earned by it in its milling business were being wiped out by the speculation losses year after year, M/s. Meatles Ltd. decided to transfer the Crown Flour Mills to the assessed-company. The assessed-company also decided to start a flour milling business as its own original business was running in a loss and for that purpose, it decided to purchase the Crown Flour Mills from M/s. Meatles Ltd. The assessed-company and M/s. Meatles Ltd., thereforee, executed an agreement dated February 1, 1975, by which M/s. Meatles Ltd. agreed to sell the Crown Flour Mills to the assessed-company in consideration of Rs. 8,75,000 by accepting the equity shares of an equal amount of the assessed-company and to sell the stock-in-trade and other assets and liabilities of the Crown Flour Mill for a sum of Rs. 3,75,063 and odd, the said amount being treated as a loan advanced to the assessed-company on interest at the rate of 5%. The assessed-company also agreed to purchase the Crown Flour Mills on the same terms. It was further agreed that a proper sale deed would be executed by M/s. Meatles Ltd. in favor of the assessed-company and that the expenses for the execution of the sale deed should be borne by the assessed-company. In pursuance of the aforesaid agreement, the assessed-company took actual possession of the Crown Flour Mills, and its stock-in-trade, etc., on the same date, i.e., February 1, 1975. The price of Rs. 3,75,063 and odd was credited by the assessed-company to the account of M/s. Meatles Ltd., Delhi, in its own books with a liability to pay 5% interest thereon. The assessed-company actually started running the said mills on the same date, namely, February 1, 1975. Necessary intimations regarding the change of what the Tribunal has described as the proprietorship of the Crown Flour Mills were given to the various authorities concerned and the Government departments. On April 3, 1975, the assessed-company allotted equity shares of the face value of Rs. 8,75,000 to M/s. Meatles Ltd. as consideration for the transfer of the so-called proprietorship rights of the Crown Flour Mills. Necessary intimation of the allotment of the shares was given to the Registrar of Companies on the same day. The execution of the sale deed as contemplated under the agreement was, however, postponed, as the stamp duty payable on the sale deed had increased from Rs. 15,000 to Rs. 75,000 and the assessed-company which had to bear the expenses of the registration of the sale deed was not in a position to produce the money for the same. The sale deed was actually not executed during the previous year relevant to the assessment year 1958-59.

4. In its return of income for the assessment year 1958-59, the assessed-company while showing its income from the business of the Crown Flour Mills claimed depreciation amounting to Rs. 56,265 on the building, plant and machinery employed in the Crown Flour Mills. The Income-tax Officer disallowed the assessed's claim on the ground that the assessed-company was not the owner of the Crown Flour Mills inasmuch as no sale deed had been executed by M/s. Meatles Ltd. in favor of the assessed-company. The assessed-company's claim for depreciation was also disallowed by the Appellate Assistant Commissioner. The assessed-company preferred a second appeal before the Tribunal against the disallowance of its claim of depreciation and in support of its claim, the assessed-company referred to the orders of the Tribunal in the wealth-tax and income-tax assessments of M/s. Meatles Ltd. for the assessment year 1957-58, in which another Bench of the Tribunal had held that there was a sale of the Crown Flour Mills by M/s. Meatles Ltd., Delhi, in favor of the assessed-company, although no sale deed had been executed, and that M/s. Meatles Ltd. was not the owner of the Crown Flour Mills and that the income from the Crown Flour Mills could not be included in the income of M/s. Meatles Ltd., Delhi. Following its orders in the wealth-tax and income-tax assessments of M/s. Meatles Ltd., Delhi, referred to above, the Tribunal held that the building, plant and machinery of the Crown Flour Mills was the property of the assessed-company within the meaning of Section 10(2)(vi) of the Act and, as such, the assessed-company's claim for depreciation should be allowed. But, at the instance of the Commissioner of Income-tax, Delhi (Central), New Delhi, the Tribunal has referred the above-mentioned question to this court under Section 66(1) of the Act.

5. The relevant provisions of the Act are Sub-section (1) and clauses (iv) and (vi) of Sub-section (2) of Section 10 which are reproduced below :

'Section 10. (1) The tax shall be payable by an assessed under the head 'Profits and gains of business, profession or vocation' in respect of the profits and gains of any business, profession or vocation carried on by him.

(2) Such profits or gains shall be computed after making the following allowances, namely :--...

(iv) in respect of insurance against risk of damage or destruction of buildings, machinery, plant, furniture, stocks or stores used for the purposes of the business, profession or vocation, the amount of any premium paid;...

(vi) in respect of depreciation of such buildings? machinery, plant or furniture being the property of the assessed, a sum equivalent, where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessed as may in any case or class of cases be prescribed and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed.'

6. According to the relevant provisions of Section 10 of the Act which have been reproduced above, the assessed is entitled to an allowance of depreciation on the building, machinery, plant or furniture if he satisfies two conditions, namely:--

(i) that the said building, machinery, etc., is the property of the assessed, and

(ii) that the said building, machinery, etc., is used for the purposes of the business, profession or vocation of the assessed.

7. There is no dispute in the present case that the Crown Flour Mills was used during the assessment year under reference for the purposes of the assessed's business. The controversy is only in regard to the second condition, namely, whether the Crown Flour Mills was the property of the assessed-company during the said assessment year.

8. The corresponding provision in the Income-tax Act, 1961 (hereinafter referred to as 'the new Act'), is Section 32, the relevant portions of which are as follows :

'Section 32. (1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessed and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of Section 34, be allowed--.........

(ii) in the case of buildings, machinery, plant or furniture, other than ships covered by clause (i), such percentage on the written down value thereof as may in any case or class of cases be prescribed.'

9. Under Section 32 of the new Act, thereforee, an assessed can claim depreciation in respect of the buildings, machinery, etc., by satisfying two conditions, namely:

(i) that such buildings, machinery, etc., are owned by the assessed, and

(ii) that they are used for the purposes of business or profession of the assessed.

10. The condition relating to the use of the building, machinery, etc., is the same as is prescribed in Section 10(2)(vi) of the Act and there is no dispute, on this point. The question for consideration is whether the conditionregarding the ownership of the building, machinery, etc., by the assessed is the same as is prescribed under the Act, although the words used in Section 10(2)(vi) of the Act are different, namely, 'being the property of the assessed'. In other words, the question is whether the words ' being the property of the assessed 'used in Section 10(2)(vi) of the Act have the same meaning as the words' owned by the assessed' appearing in Section 32(1) of the new Act. According to the learned counsel for the revenue, the meaning of the words used in Section 10(2)(vi) of the Act and Section 32(1) of the new Act is the same. But according to the learned counsel for the assessed, the words used in Section 10(2)(vi) of the Act did not have the same meaning as the words used in Section 32(1) of the new Act and that in order to claim depreciation under Section 10(2)(vi) of the Act, the assessed need not be the owner of the building, machinery, etc., and that it is sufficient if he has got an interest in the property which may be short of full ownership but which may be of the nature of the interest which a person has by virtue of Section 53A of the Transfer of Property Act, 1882.

11. The earliest case cited before us by the learned counsel for the revenue in support of his contention is a Full Bench judgment of the Madras High Court in Mangalagiri Sri Umamaheswara Gin and Rice Factory v. Commissioner of Income-tax, [1926] 2 ITC 251 . The facts of that case were that a limited company incorporated for the purpose of milling rice, acting in pursuance of authority given in the memorandum of association, leased out the buildings, plant, machinery, etc., to another company for a fixed annual rent. Under the lease, the lessees were to do the necessary repairs and to hand back the mills in good working order, while the Lessers were to bear the loss by depreciation by wear and tear caused by the working of the mill. On the assessment to income-tax on the rent received under the lease, the company claimed an allowance for depreciation under Section 10(2)(vi) of the Act. The assessed's claim was allowed by the High Court on the ground that the company was the owner of the building, plant, machinery, etc., and that the same were being used for carrying on the business of letting a rice mill. The following observations of Krishnan J. bring out the meaning of the words 'being the property of the assessed' appearing in Section 10(2)(vi) of the Act:

'As very correctly observed by the learned Commissioner of Income-tax, two conditions must be fulfillled by the assesseds before they become entitled to the deduction claimed for depreciation under Section 10(2)(vi); the property depreciated must belong to the assesseds and must be ' used for the purpose of the business'.'

12. The underlining is ours. The following observations of Beasley J. in the same case throw further light on the point:

'The only point upon which I had any doubt was whether it could be said that the assesseds were themselves carrying on business, because it is not only necessary for an assessed before becoming entitled to the deduction for depreciation under Section 10(2)(vi) of the Act to be the owners of the property in respect of the property depreciated but that also that property must be used for the purpose of the business. There is no doubt, of course, that the assessed are the owners of the property; but is the property used for the purpose of business ?'

13. The learned judge ultimately held that the property was being used for the purpose of the business of the assessed. From the above observations, it would appear that the words 'being the property of the assessed' appearing in Section 10(2)(vi) of the Act were held to mean that the property must belong to the assessed or that the assessed must be the owner of the property.

14. The next case cited by the learned counsel is a judgment of the Privy Council in Commissioner of Income-tax v. Buckingham & Carnatic Company Ltd. : [1935]3ITR384(Mad) . The assessed-company in that case acquired the business of five other companies and took over the buildings and machinery of the latter. The total cost of the buildings and the machinery of the said five companies was about Rs. 91 lakhs, but they were taken over by the assessed-company at their written down value on the date of purchase, which was about Rs. 34 lakhs. The assessed-company claimed depreciation in respect of the buildings and machinery as acquired by it. The question for consideration before the Privy Council was whether the allowance to be made to the assessed-company in respect of depreciation of buildings and machinery used by them for the purpose of their business should be calculated by reference to the cost thereof to the assessed-company or by reference to the original cost thereof to the companies from which such buildings and machinery were acquired by the assessed-company. While deciding this question, the Privy Council made the following observations which throw light on the point at issue in the present case:

'The sub-section (Section 10(2)(vi)) provides for the allowance in respect of depreciation of buildings and machinery, which are the property of the assessed, to the extent of the percentage prescribed on the original cost thereof to the assessed. The word ' assessed ' is used in the sub-section in two places: firstly, with regard to the ownership of the property and, secondly, with regard to the original cost thereof.

In the ordinary and natural meaning of the sub-section, the word assessed' used in the two connections must refer to the same person. Who then is that person The answer is given by the sub-section itself, namely, the person who owns the property in question and who is being assessed and the depreciation is to be based on the original cost of such property to such person, viz., in this case the company.'

15. The Privy Council has, thus, equated the words 'being the property of the assessed' appearing in Section 10(2)(vi) of the Act with the ownership of the property.

16. The third case cited by the learned counsel is a judgment of a Division Bench of the Bombay High Court in Poona Electric Supply Co. Ltd. v. Commissioner of Income-tax, [1946] 14 ITR 618 . The assessed-company in that case was obliged under the provisions of the Indian Electricity Act to convert supply of electrical energy from D.C. to A.C. system and under the terms of its license it had also to change and substitute at its cost the consumers' equipment, i.e., fans, radios, etc., so as to enable the consumers' equipment to be worked on the A.C. system. In carrying out the above obligation, the assessed-company had to make alterations in its own cables, service lines and meters and, in addition, it had to carry out replacement in the consumers' fans, radios, etc. The assessed-company claimed depreciation not only on the cost of the cables, service lines and meters replaced by it, but also on the cost of the consumers' fans, radios, etc., which were also replaced by it. The High Court allowed the assessed's claim in respect of the cables, service lines and meters but disallowed the assessed's claim in respect of the replacement of the consumers' fans, radios, etc. The reasons given by the High Court in allowing a part of the assessed's claim and disallowing another part thereof bring out the meaning of the words 'being the property of the assessed' appearing in Section 10(2)(vi) of the Act. The High Court observed thus :

'In our view this argument overlooks the express words of Section 10(2)(vi) of the Act. That clause provides for an allowance in respect of depreciation of such buildings, machinery, plant or furniture, being the property of the assessed ......... . The clause, thereforee, clearly appliesonly to the property of the assessed ............ . The section, thereforee,clearly contemplates, as is ordinarily understood, the depreciation in value of the assessed's own assets ......... . As the expenditure is in respect ofthe property of the consumers, although it is incurred for working the system of the company, it is still an expenditure not in respect of the property of the assesseds. thereforee, the case is not covered by Section 10(2)(vi) and in our opinion the conclusion of the Tribunal is correct.'

17. The underlining is ours. It would thus appear that according to the Bombay High Court the words 'being the property of the assessed' have the same meaning as the assessed's own assets.

18. The decisions referred to above, in our view, do support the contention of the learned counsel for the revenue that the words 'being the property of the assessed' appearing in Section 10(2)(vi) of the Act have the same meaning as ownership of the buildings, machinery, etc., on which the depreciation is claimed. We shall now proceed to consider the cases cited by the learned counsel for the assessed in support of his contention that even an interest in property which falls short of full ownership is also property of the assessed within the meaning of Section 10(2)(vi) of the Act.

19. The first case cited by the learned counsel for the assessed is a Full Bench judgment of the Madras High Court in Commissioner of Income-tax v. Madras Cricket Club, : [1934]2ITR209(Mad) . The assessed in that case was the Madras Cricket Club which was registered as a limited company under the Indian Companies Act, 1913. After the incorporation of the club, it took over the assets and liabilities of an unincorporated club bearing the same name including the buildings, etc., constructed by it on the land which it had taken on lease from the Government of Madras. The assessed-club entered into a formal lease of the land with the Government of Madras for a period of 20 years commencing from 1st May, 1925. During the assessment year 1931-32, the assessed-club was assessed on its income from gate collections and on the interest derived from investment, but not on the annual letting value of the buildings. But for the assessment year 1932-33, the Income-tax Officer included in the club's assessment the net annual value of the buildings amounting to Rs. 1,1,32, under Section 9 of the Act. The assessed contended that, as the buildings were erected on the land belonging to the Government, the assessed was not the owner of the buildings and was not liable to be assessed on the net annual value of the buildings under Section 9 of the Act. The High Court negatived the assessed's claim and upheld the assessment made by the Income-tax Officer holding that the assessed-club was the owner of the buildings notwithstanding the fact that it was not the owner of the land on which the buildings were erected. The learned counsel for the assessed seeks to rely upon this decision to support his contention that for the purpose of Section 10(2)(vi) of the Act, the assessed need not be the full owner of the building, machinery, etc. In our view, this decision does not support the assessed's contention. The following observations of Beasley C. J. will make the position clean

'The rule in India which is different from that in England, is that a person who builds a superstructure upon the land of another man remains the owner of the superstructure and can at the end of his term remove that superstructure from the land, whereas in England a person who erects a building on the land of another cannot do so as the building at the end of the lease becomes the property of the Lesser.'

20. Further,

'I now come to the next question raised and that is that the income-tax authorities are not entitled to assess the assesseds as the owners of these buildings because it is argued that the section contemplates only an assessment upon full owners of buildings. I am not at all clear as to what is meant by the description ' full owners '. So far as I understand it, what is contended for in connection with the description is that in order to come within the provision of this section the person who owns the building must also be the owner of the land upon which it stands and possibly the land surrounding it. I see nothing to warrant any such contention. Section 9(1) says that the tax shall be payable by an assessed under the head 'property' in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner. Clearly, the Madras Cricket Club, the assesseds here, are the owners of those buildings and, thereforee, they fall to be assessed under Section 9.'

21. These observations clearly indicate that so far as the buildings on the land were concerned, the assessed-club was their owner within the meaning of Section 9 of the Act even though the land on which the buildings stood belonged to the Government. These observations negative the contention of the learned counsel for the assessed that the ownership contemplated under Section 10(2)(vi) of the Act is a limited ownership or an imperfect ownership, such as the right which a person enjoys under Section 53A of the Transfer of Property Act.

22. The next case cited before us by the learned counsel for the assessed is a judgment of the Calcutta High Court in Ballygunge Bank Ltd. v. Commissioner of Income-tax, : [1946]14ITR409(Cal) . In that case the assessed, a limited company, obtained a lessee of a plot of land for a period of 40 years. The lease deed provided, inter alia, that the assessed should build houses on the land within a specified time by using the best materials, that the Lessers or their representatives would be entitled to supervise the building construction, and that after the expiration of 40 years the houses would belong to the Lessers. Under the lease the assessed should pay the entire municipal tax in respect of the houses and a proportionate municipal tax in respect of the land. Upon acquisition of the land by the Government or by a public authority the Lessers were entitled to all compensation in respect of the land but compensation in respect of the buildings was to be divided between the Lessers and the assessed. The question for consideration before the High Court was whether the rent derived from the buildings erected by the assessed was properly assessed in its hands under Section 9 of the Act. The assessed's contention was that in view of the terms of the lease the buildings were not the property of the assessed and that, thereforee, the income from the buildings was not assessable in its own hands. The High Court rejected this contention and held that during the currency of the lease the houses constructed by the assessed were its property and that, thereforee, the income from such buildings was assessable in the hands of the assessed under Section 9 of the Act. This decision does not advance the assessed's case any further, because it does not support the contention urged on behalf of the assessed that it was not the full owner of the houses but only a limited owner of the houses which it had constructed on the land.

23. The learned counsel for the assessed also referred to a decision of the Supreme Court in Dr. K.A. Dhairyawan v. J.R. Thakur, : [1959]1SCR799 . The appellants in that case, as trustees of the Mankeshwar Temple, executed a registered lease in favor of the respondent whereby they demised a parcel of land on lease for 21 years. Under the terms of the lease, the lessee had to construct within six months from the date of the lease a double storeyed building consisting of shops on the ground floor and residential rooms on the upper floor. The construction had to be to the satisfaction of the Lessers' engineers. The building had to be insured in the joint names of the Lessers and the lessee with an insurance firm approved by the Lessers. On the termination of the lease either at the end of twenty-one years or earlier, the lessee was to surrender and yield up the demised premises including the building with its fixtures and appurtenances to the Lessers without any compensation for the same. It was held by the Supreme Court that such a contract did not transfer the ownership of the building to the Lessers while the lease subsisted. In other words, it was held that so long as the lease subsisted, the lessees were the owners of the building. The principle enunciated by the Supreme Court is the same as the one laid down in the two cases referred to supra and we are unable to see how the assessed can rely upon the judgment of the Supreme Court to support its contention that the interest in property which an assessed must possess in order to obtain the benefit under Section 10(2)(vi) of the Act need not be the full ownership of the property.

24. The last case cited by the learned counsel is a judgment of the Mysore High Court in Y.V. Srinivasamurthy v. Commissioner of Income-tax : [1967]64ITR292(KAR) . The assessed in that case took on lease a vacant site for a period of 20 years for the purpose of constructing a cinema theatre. Under the lease, the assessed was required to raise a construction on the site, a building costing not less than Rs. 15,000. He was entitled to be in enjoyment and possession of the site leased and the building put up thereon for a period of 20 years and after the stipulated period of 20 years, the assessed should leave the scheduled premises with the constructions so raised by him to the Lesser and thereafter should have no manner of right, title or interest in the premises or the construction so raised thereon. The assessed's claim for depreciation, in respect of the building constructed by him on the site in pursuance of the lease deed was rejected by the department, but was ultimately allowed by the High Court on the ground that the assessed was the owner of the building in question during the currency of the lease deed. In so holding the High Court followed the rule laid down by the Supreme Court in the case of Dr. K.A. Dhairyawan, already referred to. This case is on par with the other cases cited by the learned counsel for the assessed and as we have already observed, these cases do not support the contention of the assessed that he need not be the owner of the building, machinery, etc., in order to claim depreciation under Section 10(2)(vi) of the Act and that it is sufficient if he holds some interest in the said building, machinery, etc.

25. The interest which the assessed has in the Crown Flour Mills is an interest of the nature described under Section 53A of the Transfer of Property Act. The nature of such an interest has been explained by the Privy Council in S.N. Banerji v. Kuchwar Lime and Stone Co. Ltd. in the following terms:--

'But the words of the section make it quite plain that the section does not operate to create a form of transfer of property which is exempt from registration. It creates no real right: it merely creates right of estoppel between the proposed transferee and transferor, which have no operation against third persons not claiming under those persons.'

26. The Supreme Court also has described the nature of the rights under Section 53A of the Transfer of Property Act in Ram Gopal Reddy v. Additional Custodian of Evacuee Property, : [1966]3SCR214 . The appellant in that case claimed to have purchased certain patta lands from one Abdul Aziz Khan and had paid him Rs. 6,127 and odd in Osmania Sicca. The appellant got possession of the land and thereafter in June, 1949, Abdul Aziz Khan applied in the Tehsil office for the transfer of the patta in the name of the appellant. Before, however, any transfer was made, Abdul Aziz Khan seemed to have migrated to Pakistan. Consequently, the Deputy Custodian took steps to declare Abdul Aziz Khan an evacuee. When the appellant objected to the proposal of the Deputy Custodian, he was asked to produce evidence in support of his claim and the appellant admitted that there was no registered sale deed duly executed by Abdul Aziz Khan in his favor. The Deputy Custodian, thereforee, held that there was no transfer of property in favor of the appellant and the property was declared as evacuee property. The appellant filed a suit in the court of the subordinate judge praying that a declaration be made that he was the owner of the property and in possession thereof and that the Custodian be ordered to execute and register a sale deed in his favor. The suit was resisted by the Custodian on the ground that the suit was barred under Section 46 of the Administration of Evacuee Property Act, 1950. The subordinate judge, however, held that the appellant was entitled to the benefit of Section 53A of the Transfer of Property Act and that the civil court had jurisdiction inasmuch as the sale had taken place before 1947. Ultimately, the matter came up before the Supreme Court. While holding that the civil court had no jurisdiction to entertain the suit, the Supreme Court made the following observations which indicate the nature of the right conferred by Section 53A of the Transfer of Property Act:

'Nor can it be said on the facts found in the present case that the appellant had become the owner of the property before 1947 for admittedly the property was worth more than Rs. 100 and it is not disputed that a registered sale deed was necessary to pass title from Abdul Aziz Khan to the appellant. No registered sale deed was executed in this case and thereforee the property did not pass from Abdul Aziz Khan to the appellant even up to the time when Abdul Aziz Khan became an evacuee. It may be that if Abdul Aziz Khan had tried to get back the property, Section 53A of the Transfer of Property Act would come to the aid of the appellant in defense. But the present suit has been filed to establish the right of the appellant as owner of the property and in such a suit the appellant cannot take the benefit of Section 53A of the Transfer of Property Act.'

27. From the above discussion, we hold that the words 'being the property of the assessed' appearing in Section 10(2)(vi) of the Act have the same meaning as the words 'owned by the assessed' appearing in Section 32(1) of the new Act and that these words merely clarify the position that already existed under Section 10(2)(vi) of the Act. The interest which a person has in a property by virtue of Section 53A of the Transfer of Property Act does not amount to ownership of the property. In the present case, the Crown Flour Mills constituted immovable property of the value of more than Rs. 100 and the title in the said property would not pass to the assessed in the absence of a registered sale deed. As admittedly no sale deed was executed by M/s. Meatles Ltd. in favor of the assessed-company during the assessment year under reference, the title in the Crown Flour Mills did not pass to the assessed-company. The Crown Flour Mills, thereforee, was not the property of the assessed-company during the assessment year under reference and, as such, one of the conditions prescribed under Section 10(2)(vi) of the Act was not satisfied and the assessed-company could not claim depreciation in respect of the Crown Flour Mills.

28. The Tribunal in allowing the assessed's claim has relied upon the wealth-tax and income-tax assessments of M/s. Meatles Ltd., Delhi, in which it was held that there was a sale of the Crown Flour Mills by M/s. Meatles Ltd. in, favor of the assessed-company within the meaning of Section 10(2)(vii) of the Act. We do not consider it necessary to examine the correctness of the above view expressed by the Tribunal in the assessments of M/s. Meatles Ltd., Delhi, because the claim of the assessed-company is not one under Section 10(2)(vii) of the Act. We may, however, note that the view of the Tribunal in the case of M/s. Meatles Ltd. was held to be wrong by this court, in Commissioner of Income-tax v. Meatles Ltd., : [1972]84ITR37(Delhi) , where following the decision of the Supreme Court in State of Madras v. Gannon Dunkerley, and Co. (Madras) Ltd., : [1959]1SCR379 and Alapati Venkataramiah v. Commissioner of Income-tax, : [1965]57ITR185(SC) this court held that in the absence of a registered sale deed there was no sale of the Crown Flour Mills by M/s. Meatles Ltd. in favor of the assessed-company herein within the meaning of Section 10(2)(vii) of the Act.

29. The question referred to us by the Tribunal is, thereforee, answered in the negative, i.e., in favor of the revenue and against the assessed-company. There shall be, however, no order as to costs.


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