MYSORE MINERALS LTD., M.G. ROAD, BANGALORE vs. COMMISSIONER OF INCOME TAX, KARNATAKA, BANGALORE

CIVIL APPEAL No. 5374/1994Supreme Court1999 INSC 37601 September 1999Bench: 2 JudgesAuthor: S. RAJENDRA BABU, R.C. LAHOTI MYSORE MINERALS LTD., M.G. ROAD, BANGALORE10 pages
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What were the facts?

The assessee, Mysore Minerals Ltd., purchased seven low-income group houses from the Housing Board for its staff for the assessment year 1981-82. The assessee made part payments and was allotted the houses, with possession delivered by the Housing Board. However, the deed of conveyance was not executed by the Housing Board in favour of the assessee. The assessee allotted these houses to its staff, who were using them. The Assessing Officer rejected the assessee's claim for depreciation under Section 32 of the Income Tax Act, 1961, stating the assessee was not the owner due to the absence of a conveyance deed. The Commissioner of Income Tax (CIT) allowed the assessee's appeal. The Income Tax Appellate Tribunal (ITAT) set aside the CIT's order. The High Court, on a reference, agreed with the ITAT, ruling against the assessee.

What did the Supreme Court hold?

The Supreme Court held that the term 'owned' in Section 32(1) of the Income Tax Act, 1961, should be assigned a wider meaning. It refers to a person in possession of property in their own title, exercising dominion over it to the exclusion of others, and having the right to use and occupy it. This includes individuals who have acquired possession in their own right and are using the property for their business or profession, even if a formal deed of title has not been executed as per the Transfer of Property Act or Registration Act. The Court reasoned that the concept of depreciation is for the benefit of the person who has invested in the capital asset, is utilizing it, and is experiencing loss due to wear and tear. Allowing depreciation to the assessee, who has invested, possesses, and uses the houses, while the Housing Board, the legal owner, is not using them for business, fulfills the legislative intent. The High Court's view was therefore incorrect. The appeal was allowed, and the High Court's judgment was set aside.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in rejecting the claim of the assessee for depreciation in respect of the seven houses in respect of which the assessee has not obtained a deed for conveyance from the vendor although it had taken possession and made part payment of the consideration? (Question of law and fact, concerning Section 32(1) of the Income Tax Act, 1961). Assessee's contention: The vesting of title in the assessee, even if short of absolute ownership, should entitle it to claim depreciation under Section 32 of the Act. Revenue's contention: The term 'owned' in Section 32(1) should be interpreted in its strict legal sense. Without the execution and registration of a sale deed, the assessee is not entitled to claim depreciation.

Which sections of the Income-tax Act were involved?

Section 32(1),Section 256(1),Section 261

AI-generated summary — verify with the full judgment below

A MYSORE MINERALS LTD., M.G. ROAD, BANGALORE v. COMMISSIONER OF INCOME TAX, KARNATAKA, aANGALORE SEPTEMBER 1, 1999 B [S. RAJENDRA BABU AND R.C. LAHOTI, JJ:] Income tax Act, 1961: Section 32(1)-AY 1981-82_.:._Depreciation-Claim of-Expression C "building owned by the assessee"-Meaning and scope of-Assessee made part payment to Housing Board and was allotted houses and given possession-Assessee in turn allotted the said houses to its staff who were actually using the same-However, deed of conveyance not executed by the Housing Board-Held: The said expression refers to the person in whom for D the time being vests the dominion over, and the right to use, the building and who is actually using the building for the purpose of his business or profession-Hence, assessee entitled to claim depreciation in respect of the · said houses although deed of conveyance not executed-Transfer of Property Act, 1882, S.

54.

E F Interpretation of Statutes: Taxing statutes-Interpretation of-Held: Where two interpretations are possible, the one favourable to the assessee should be preferred. Words and Phrases: "Owner", "Own", "owned", "ownership" and "building owned by the assessee

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