Sabyasachi Mukharji, J.
1. This reference relates to the assessment year 1964-65. The assessee is a private limited company and is engaged in the construction work of huge magnitude. The assessment year, as we have stated before, is 1964-65 and the relevant accounting year ended on 30th June, 1963. The assessee got a big contract from the Vizag Port authority for over Rs. 3 crores for construction of four berths of the Port.The contract was awarded during the accounting year relevant to the assessment year under reference, though the construction continued for 3 to 4 years. In order to do this job, the assessee had intimated to the Govt. of India that it should be allowed to import special types of cranes, machinery, dumpers, etc., from East European countries. The Government, however, insisted upon the assessee to import the aforesaid items from the U.S.A. as could be seen from the letter dated 26th June, 1961, addressed to the assessee by the Superintending Engineer, Vizag Port, The assessee, accordingly, agreed to import the aforesaid items from the USA as could be seen from its letter dated 1st July, 1961, addressed to the Chief Engineer, Vizag Port. Thereafter, in the letter dated 14th December, 1961, the Chief Engineer, Vizag Port, informed the assessee that the Govt. of India would recover the rupee equivalent of the total cost of the aforesaid items from the monthly bills submitted by the assessee and till the completion of the project the Government will have permanent Hen on the said items. We shall refer to the actual terms used in the correspondence, as a great deal of argument has been advanced before us on the expression used in those letters. On the basis of the aforesaid correspondence, the machinery including the spare parts worth Rs. 52.65 lakhs were actually imported by the Govt. of India from the USA. The payment for the machinery was also made by the Govt. of India as per TCM procedure. The assessee was allowed to use the machinery with the stipulation that it would be transferred to the assessee on the completion of the job. The assessee showed such machinery as assets ia the balance-sheets while on the liabilities side the value of such machinery was reduced by instalments paid during the year as loan from the Govt. of India. In its return of income for the year under reference, the assessee claimed deduction of Rs. 9.6 lakhs and Rs. 8.05 lakhs for depreciation and development rebate in respect of the plant and machinery imported from the USA.
2. The 1TO in his order dated 5th March, 1970, after setting out the facts as well as considering the letters, was of the opinion that the assessee was not the legal owner of the machinery imported and, therefore, was not entitled to claim any depreciation as well as development rebate thereon.
3. There was an appeal before the AAC. The assessee reiterated its claim for deduction for depreciation and development rebate. The AAC, in his order dated 7th September, 1979, after considering at great length the arguments advanced on behalf of the assessee, accepted the assessee's claim.
4. Being aggrieved by the order of the AAC, the Revenue went up in appeal before the Tribunal. It was argued on behalf of the Revenue afterreferring to the various correspondence between the assessee and the Vizag Port authority that the tenor of the correspondence did not show that there was any hire purchase agreement between the assessee and the Govt. of India in respect of the importation of the aforesaid items from the USA. It was further submitted that there was no element of outright purchase of the aforesaid items by the assessee but there was an agreement to sell, as contemplated under Section 19 of the Sale of Goods Act. It was further submitted that till the sale was finally completed the assessee did not become the owner of the aforesaid items and, therefore, was not entitled to any depreciation or development rebate. Reliance was placed on the decision of the Madhya Pradesh High Court in the case of Sardar Tara Singh v. CIT : 47ITR756(MP) as well as on the decision of the Allahabad High Court in the case of Seth Banarsi Das Gupta v. CIT : 81ITR170(All) and it was submitted on behalf of the Revenue that in order to be entitled to claim depreciation and development rebate under the I.T. Act, the assessee has to prove the legal ownership over the assets and not merely the beneficial ownership. On behalf of the Revenue, reliance was placed on the decision of this High Court in the case of CIT v. Ganga Properties Lid. : 77ITR637(Cal) and it was submitted that the concept of beneficial ownership was unknown under the Indian law and the only ownership which was recognised under the Indian law was the legal ownership. In this view of the matter, it was submitted that the AAC was not justified in holding that the assessee was entitled to depreciation and development rebate in respect of the aforesaid items.
5. On behalf of the assessee, on the other hand, support was drawn to the order of the AAC on this point and it was submitted that on reading the entire correspondence, which took place between the assessee and the Vizag Port authority, it is clear and beyond doubt that the assessee was the owner of the aforesaid imported items as it was the assessee who had purchased the said items with the financial help of the Government, In this view of the matter it was submitted that the Commissioner was not justified in referring in his order that even on the date of passing of the order the machinery had not been transferred by the Port authority to the assessee. Reliance was placed on several decisions, viz., the decision of the Lahore High Court in the case of CIT v. Bhojraj Harichand and that of the Supreme Court in the case of Sundaram Finance Ltd. : 2SCR828 . On behalf of the assessee, it was, however, urged that the true effect of the aforesaid correspondence should be determined in the light of the surrounding circumstances and unless prohibited by statute, it would be necessary for the Tribunal to go beyond the correspondence and to determine the true nature of the transaction whatever might have been the form of the document. It was furthersubmitted on behalf of the assessed that the assessee was the legal owner of the aforesaid machinery imported from the USA and, therefore, there was no question of transfer of the said items by the Govt. of India to the assessee. It was further urged that there could be two types of hire purchase agreements. There could be an agreement directly between the seller and the purchaser without the financial backing of anybody. There could be a tripartite agreement between the seller, the purchaser and the financier who would finance the purchase for buying the articles from the seller. In the latter type of agreement, in order to safeguard his position, the financier would have a lien on the items purchased from the seller. In such type of agreement, it was submitted, there could be no doubt that it would be the purchaser who would be the owner of the items purchased from the seller and not the financier. On behalf of the assessee, it was submitted that reading the correspondence as a whole, the assessee fell under the latter type of the agreement, if at all. In this connection reliance was placed on certain decisions and it is not necessary for us to refer to these decisions.
6. Reliance was placed on the circulars of the CBDT dealing with the hire purchase agreement issued on 23rd March, 1943, and 26th June, 1959, recognising the claim of depreciation and development rebate on machinery purchased on hire purchase basis.
7. The Tribunal after adverting to the letters as well as the other correspondence upheld the order of the AAC. The Tribunal referred to the submissions and also referred to certain other correspondence which the Tribunal had set out in para. 12 of its appellate order and came to the conclusion as follows ;
' On a plain reading of the aforesaid correspondence we have no doubt im our mind that it was the assessee who was the owner of the items imported from the U.S.A. and the Government of India was merely the financier of the assessee for the importation of the said items as per T.C.M. procedure. In para. 2 of the letter dated 27-6-64 it is pertinent to note that 'the Ministry of Commerce and Industry have agreed to the import of the items mentioned.....' The article 'the' before the word 'import' clearly indicates that the Govt. of India has agreed to import the items mentioned by the assessee in its tender. If the Government of India were to import the said items on its own account, there was no need for using the word 'agreed' in the aforesaid sentence. Again in para. 3 of the said letter the words ' it has been decided to release' also suggest that the Govt. of India have agreed for the import of the items by the assessee and further agree to release foreign exchange for that purpose. If the Govt. ofIndia were to import the items on their own account, there was no need to use these words in para. 3. Para, 5 of the said letter also indicates that the items to be imported from the USA was on account of the assessee only. In para. 6 of the aforesaid letter the word 'transferred' is very significant in order to arrive at the ownership of the items imported from USA. If the Govt. of India were the owner of the items imported from USA, the proper word would have been ' sold ' and not ' transferred'. Again, para. 16 of the said letter clearly indicates that it was an offer made by the Government of India which the assessee was required to accept within seven days of the receipt of the said letter in order to enable it to receive the said contract. As the assessee wanted to import the aforesaid items from East European countries and the Government of India had insisted upon import of the same from USA, the assessee in its letter dated 21-7-61 'hoped that the cost of American machinery will not affect our cost structure and in case it does, the Government will take the same into consideration '. The most important letter is the letter dated 14 12-61. The extract of the Government directives (a) clearly establish beyond doubt that the assessee was the legal owner of the items imported from USA. The words ' may be purchased ' in directive (a) clearly shows that it was the assessee who was to purchase the items. If the assessee was not the legal owner of the items purchased from the USA there was no need for the use of the word 'approval' in directive (b). Directive (c) shows that initially the Govt. of India would pay the cost of equipment to be imported from the USA and the rupee equivalent of the same would be recovered from the assessee from the bills submitted by it. Directive (d) is the most significant evidence to show that it was the assessee who was the legal owner of the items imported from the USA. If the Government of India were the legal owner of the items imported from the USA, there was no need to use the words ' remain the property of the Government of India or be mortgaged to the Government of India '. The use of the word ' lien ' is also of great significance. The lien can be exercised only over a property of someone else and not one's own property. Again, directive (e) clearly shows that as the full payment of the rupee equivalent of the total cost of the items imported from the USA is by the assessee, the assessee would be free of any lien of the Government of India in respect ;of these items. Finally, in the penultimate paragraph, the word ' allowed ' also suggests that the assessee was the legal owner of the items to be imported from the USA and not the Government of India. Letters dated 7-7-62 and 27-7-62 also lead to the conclusion that it was the assessee who was the legal owner of the items imported from the USA. In this view of the matter, we uphold the order of the AAC on this point. As we have decided that the assessee was the legal owner of the itemsimported from the USA, we do not want to discuss the arguments advanced on the assumption that there was a hire purchase agreement between the assessce, the Government of India and the USA parties.
As regards the assessee's claim for deduction of interest in respect of the amount due to the Vizag Port authority, the learned representative for the department submitted that the AAC was not justified in allowing the assessee's claim without properly appreciating the reasons given by the ITO for the amount disallowed by him. It was further submitted that since the interest was paid to the Vizag Port authority for the importation of items from the U.S.A , which was of capital nature, it enhanced the purchase price of the items imported from the U.S.A. and cannot be treated as interest paid on borrowed capital. In this view of the matter, it was finally submitted that the order of the AAC may be set aside on this point and that the order of the ITO be restored. The learned representative for the assessee, on the other hand, supported the action of the AAC by relying on the decision of the Supreme Court in the case of Bombay Steam Navigation Co. (1953) P. Ltd. : 56ITR52(SC) and the circular dated 13-9-63 issued by the CBDT. He further submitted that in view of the aforesaid decisions of the Supreme Court, the I.T. authorities were bound to follow the Board's circular.
We have considered the rival submissions of the parties and are of the view that the AAC has rightly allowed the assessee's claim for deduction of interest paid by the assessee to the Govt. of India, The assessee was required to pay the interest to the Government of India as stated in letters dated 7-7-62 and 27-7-62, The assessee's claim for deduction of the interest paid to the Government of India is clearly supported by the decision of the Supreme Court in Bombay Steam Navigation Co. (1953) P. Ltd.  56 ITR 52 as well as the Board circular dated 13-9-63. In this view of the matter, we uphold the order of the AAC on this point also,
In the result, the departmental appeal is dismissed.'
8. Upon these facts, at the instance of the Revenue, the following question has been referred to this court
' Whether, on the facts and in the circumstances of the case, the assessee was the legal owner of the plant and machinery imported from the USA and, therefore, was entitled to claim depreciation and development rebate under Sections 32 and 33 of the Income-tax Act, 196t, thereon '
9. The main controversy in this case is whether the assets in question which are the subject-matter of controversy in this case are ' owned by the assessee and used for the purpose of the business ' and that these assets were used for the purpose of business there is no dispute. The sole question before us is that in the background of the facts and circumstances ofthe case can these assets or machinery be considered to be ' owned by the assessee ' for the purpose of Section 32 of the I.T. Act, 1961. In this connection our attention was drawn to the agreement between the parties which was scrutinised and examined by the Tribunal in minute detail. The said agreement is contained in several letters. The first of those letters is dated the 27th June, 1961, where the Superintending Engineer, Vizaga-patnam Port authorities, wrote to the assessee on the subject of tender for the construction of Wharves and Berths, Additional Berths Scheme, Vizagapatuam Port. By that letter the said Superintending Engineer conveyed that it was intended to award the contract on the aforesaid matter on the terms and conditions mentioned in the said letter. It was mentioned that the assessee intended to import certain items of equipment and machinery as per statements given by the assessee and copies were attached with the letter and the Ministry of Commerce and Industry have agreed to the import of the items mentioned in the lists except certain specific items mentioned in the lists which were indicated in the letter. It was further stated that it had been decided to release foreign exchange amounting to Rs. 24.63 lakhs. Clauses (5) and (6) of the said letter are as follows ;
' (5) The purchase of the plant and equipment shall be made from the U.S.A. and the T.C.M, procedure will be followed. You are requested to furnish immediately detailed specifications, duties, etc., of the plant you proposed to import.
(6) It may be understood that under the T.C.M. procedure the title of the equipment so purchased from the USA will belong to the Transport Department (Vizagapatnam Port administration) until the project is completed. The equipment will be obtained according to your requirements and will be used by you on the work during the construction period. On completion of the project the machinery will be transferred to you at cost price, which includes coat of plant, insurance, freight, handling transport, etc.; the entire cost of the plant and equipment will be withheld from the payments due to you. The above dues will be deducted from each of your on account bills. '
10. It was further mentioned that the payment of interest, if any, on the amount paid by the Government for the purchase of plant and machinery would be governed by the decision of the Government of India. The other clauses regarding maintenance and responsibility of the assessee we need not set out in detail. Clause (13) in the said letter provides as follows:
' Bills will be submitted by the contractor each month on or before the seventh for all works executed in the previous month and the engineer-in-charge shall take or cause to be taken the requisite measurement for thepurpose of having the same verified and the claim as far as admissible adjusted and paid, if possible, by the 20th of the same month. '
11. The said letter was followed by another letter written by the assessee to the chief Engineer, Visakhapatnam Port, where the assessee wanted to know the T.C.M. procedure and other particulars about the machinery and the reasons for importing them have been explained and regarding the mode of payment it was stated as follows :
'Regarding the mode of payment, we would be in a position to discuss the same as soon as the cost and date of delivery is made known to us.
It is hoped that the payment of interest, if any, will be governed by T.C.M. rules as are applicable to the Government of India. '
12. There is another letter dated the 14th December, 1961, which contains the extract of the Government's directives, which are as follows:
' (a) Only equipment which is to be used in the construction of wharf may be purchased.
(b) All purchase orders for equipment shall be approved by this department before being issued by the contractor to suppliers,
(c) The rupee equivalent to the total cost of the equipment will be paid by the contractor to the Government of India. The actual recovery of the cost of the equipment may be effected in practice and that when the amount of the bills is found inadequate, the excess over the bill should be recovered immediately from the contractor in cash.
(d) The equipment shall remain the property of the Government of India or be mortgaged to the Government of India until all work under the wharf construction contract is completed and such lien shall be paramount to any other liens on the equipment.
(e) Upon completion of the work under the wharf construction contract and full payment of the rupee equivalent of the total cost of the equipment, the equipment shall become the property of the contractor free of any Hen of the Government of India, '
13. The letter further stated that the Government have allowed the procurement of plant and machinery direct from the U.S,A. and the requisite authorities have been issued. It was highlighted on behalf of the assessee that the Government had agreed to the importation and the Government had also agreed to release foreign exchange but the assessee was to import. It was further submitted that the purchase orders were issued by the assessee to the contractor. Then, it was mentioned, it was a significant fact that interest had to be paid to the Government for the advances. The assessee, it was also submitted, could not go out of the bargain, i.e., in any event the assessee had to make the payment. On the other hand on behalf of the Revenue it was submitted before us that wemust bear in mind the particular facts and circumstances of the case, namely, that the machinery was imported by the Government of India. It is not correct that the Government imported the machinery. It is true that the machinery was imported by the authority of the Govt. of India. Payment had to be made by the Government to the American Govt. and the machinery was being obtained under what is known as ' T. C. M. ' procedure. It was submitted on behalf of the Revenue that the assesses was only allowed to use the machinery. Then it was urged that the machinery was to be transferred only on the completion of the job, i.e., until the job was completed, the assessee could not become the full owner of the machinery or could not get the transfer of the machinery. Then, it was urged that the cost of the machinery was to be realised out of the monthly bills. It was submitted on behalf of the Revenue that the ownership was retained by the Government during the pendency of the contract and the assessee did not have any incidence of ownership except the right to use even after the full payment was made. A good deal of argument was advanced before us on the use of the expression ' lien ' in the correspondence between the parties. It was submitted that from the letter dated the 14th December, 1961, as we have set out, in Clause (f) it had been stipulated ' the equipment shall become the property of the contractor free of any Hen of the Government of India'. On the one hand it was urged that Hen could not be exercised on one's own goods. On behalf of the Revenue it was urged that lien of the possessory right could be given to the owner. On the other hand, it was urged on behalf of the assessee that the owner could not have a lien over his own goods as such. On the meaning of the expression ' lien ' several authorities were cited before us. Our attention was drawn to the meaning of the expression ' lien ' in certain dictionaries. Our attention was drawn to the meaning of the expression 'lien ' as appearing in the Words and Phrases Legally Defined, Vol. 3, 2nd Edn., 1969, by John B. Saunders at p. 160. Similarly reliance was placed on Halsbury's Laws of England, 3rd Edn., Vol. 24, p. 145, Article 265. On behalf of the assessee , however, reliance was placed on the observations made by the Judicial Committee in the case of Nippon Yusen Kaisha v, Ramjiban Serowgee and our attention was drawn to the observations appearing at p. 155, where, Lord Wright had observed as follows :
' A person cannot have a lien on his own goods.'
14. The real question that we have to decide taking into consideration the surrounding circumstances, the expression used and the correspondence that passed between the parties is who was the owner of the assets in question. In other words, to whom did the title of the goods belong and when had such title passed Section 19 of the Sale of Goods Act providesthat where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be so transferred. Therefore, we have to find out from the surrounding circumstances and the background of this case, when did the parties intend that the property in question in this case should be transferred to the assessee if at all. While on behalf of the assessee it was contended that as the assessee had taken upon itself the obligation to pay the amount ordered and the goods in question were in the possession of the assessee, the property had got transferred to them in the year in question. While, on the other hand, on behalf of the Revenue it was contended that the entire transaction indicated that on completion of the conditions mentioned in the letters, which we have set out hereinbefore, the property in the goods would be transferred to the assessee and in the year in question the assessee was not the owner of the goods. In this connection, what is meant by the expression ' owner ' and how the expression 'owner' should be construed in the context of different dictionaries were cited before us. Our attention was drawn to the meaning of the word ' own ' in Webster's New Twentieth Century Dictionary, 2nd Edn., p. 1279, where it was defined as follows ;
'Own: n. (M.E. ownen, ageri; AS, agen, pp. of agen, to possess), belonging, relating or peculiar to oneself or itself; used to strengthen a preceding possessive, as, he wants his own book, he prefers his own doctor.
Own: n. that which belongs to oneself, as that is his own, I'm on my own.
Own : 1. to possess; to hold as personal property ; to have.
2. To admit, recognize, acknowledge. '
15. Similarly our attention was drawn to the Shorter Oxford English Dictionary, 3rd edn,, Vol. II, p. 1409, where the word ' own ' is defined as follows:
' Own: That is possessed or owned by the person or thing indicated by the preceding sb. or pron ; of or belonging to oneself or itself; proper; peculiar, particular, individual. '
16. Learned advocate for the Revenue drew our attention to the observation of this court in the case of S. B. (House & Land) P. Ltd. v. CIT : 119ITR785(Cal) , where the meaning of the expression ' sale ' under Section 54 of the Transfer of Property Act fell for consideration of the court and there, in that context, what did the transfer of ownership imply was construed and several decisions were referred to Similarly, on behalf of the assessee, reliance was placed on the observations of the Supreme Court in the case of R. B. Jodha Mal Kuthiala. v. CIT : 82ITR570(SC) , where it was observed by the Supreme Court that for the purpose of Section 9 of theIndian I.T. Act, 1922, the owner must be the person who could exercise the rights of the owner not on behalf of the owner but in his own right. There also the Supreme Court, at p. 578 of the report, discussed the different meanings of the expression ' ownership '. As was observed by the Calcutta decision, reliance was placed on Salmond's Jurisprudence and Stroud's Judicial Dictionary and it was stressed that various meanings of the word ' owner ' could be given. The Andhra Pradesh High Court in the case of S. P. B. P. Srirangacharyulu v. CIT : 58ITR95(AP) , had also to consider the expression 'owner ' in the context of Section 10(2)(vi)(b)of the Indian I.T. Act, 1922. Reliance was also placed on the decision of the Allahabad High Court in the case of Addl. CIT v. U. P. State Agro Industrial Corporation Ltd. : 127ITR97(All) , where the Allahabad High Court had to construe the meaning of the expression ' property owned ' by the assessee for the purpose of allowing depreciation. The Allahabad High Court was of the view that for the purpose of allowing depreciation the assessee need not have complete title over the asset and our attention was also drawn to the observations at pp. 102 to 105 of the report. Reliance was also placed on the decision of the Patna High Court in the case of Addl. CIT v. Lawlys Enterprises (P.) Ltd. : 100ITR369(Patna) , where also the question of depreciation under Section 32 arose. There, the assessee was a lessee of a building. The lessee constructed a third floor on the building and was running his hotel business. Under the terms of the lease, the lessee had the right to make additions and alterations to the building and, on the expiry of the lease, had to deliver back possession to the lessor in its original condition. On a claim made by the lessee to depreciation on the floor that was added by it, it was held that the assessee had to remove the addition before handing back possession of the building owned by the lessor and that the assessee was the owner of the third floor. The Division Bench observed that the full ownership, for a period, did not militate against the concept of ownership in jurisprudence. It is not necessary for our present purpose to examine the exhaustive meaning of the expression 'owner'. The expression 'owner' has different meanings in different contexts. It is important, as was emphasised by the Supreme Court in the case of R, B. Jodha Mal Kuthiala v. CIT : 82ITR570(SC) that the expression ' owner ' has different meanings in different contexts and the owner need.not always have the complete user of right of full ownership at all times. It appears from the tenor of the document and the terms set out hereinbefore that though the Government wanted to be secured about the repayment of money by the assessee, who was the contracting party in view of the document, factors that the payment had to be made ultimately by the assessee, the contract and the order was placed with the assessee and the user of the goods was by theassesses, it appears to us that for all real intents and purposes and also for the purpose of Section 32 of the I.T. Act, 1961, it was intended that the property in the goods would pass to the assessee at the relevant time when the contract was entered into but the right of ownership of the assessee was restricted by several conditions in order to ensure that due payment to the Government was made and the contract was fully implemented so far as his all conditions are fulfilled and the conditions must be read in that context. If it is read in that context, then, in our opinion, the Tribunal was not in error in coming to its conclusion that it made upon the terms of the construction.
17. We may also indicate here, as we have set. out before, from the facts that the assessee had showed the machinery in question as assets in its balance-sheet while on the liabilities side the value of such machinery was reduced by the instalments paid during the years was shown as loan from the Government. It appears that it was treated that those machinery as goods owned by the assessee and it was so dealt with in the balance-sheet. It does not appear there was no contention raised that either the balance-sheet was not correct or the balance-sheet contained incorrect statement.
18. In that view of the matter and for the reasons aforesaid, we are of the opinion that the Tribunal was correct in its conclusion and the question must, therefore, be answered in the affirmative and in favour of the assessee.
19. In the facts and circumstances of the case, the parties will pay and bear their own costs.
Suhas Chandra Sen, J.
20. I agree.