Beneficial ownership for depreciation: possession and business control can satisfy ownership despite later registration.

For depreciation under section 32 of the Income-tax Act, "owner" is not confined to strict legal title and may include a person who, in substance, has possession, control, enjoyment and business use of the property. Where the parties intended ownership to operate from an earlier effective date, later registration of the conveyance did not by itself defeat depreciation. Applying that wider and practical construction of ownership, the assessee, which had been running the tea estate from the effective date fixed in the conveyance, was entitled to depreciation and additional depreciation on the assets and constructions. The Tribunal was held to be wrong in denying the claim.

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Issues: Whether, for the purpose of depreciation under section 32 of the Income-tax Act, 1961, the assessee could be treated as the owner of the assets and land conveyed under an agreement with retrospective effect though the formal conveyance was registered later.

Analysis: The applicable principle is that the word "owner" in section 32 is not confined to strict legal title and may bear a wider meaning in the context of the Income-tax Act. Where possession, control, enjoyment of the property, and the intention of the parties clearly show that the assessee was carrying on business as owner in substance, the absence or postponement of registration does not by itself defeat depreciation. The same approach is consistent with the statutory scheme reflected in section 27 of the Income-tax Act, 1961, and with the practical construction of ownership adopted in income-tax jurisprudence. On the facts, the assessee had been running the tea estate from the effective date fixed in the conveyance and was entitled to treat the assets as its own for depreciation purposes.

Conclusion: The assessee was entitled to depreciation and additional depreciation on the assets and constructions in question, and the Tribunal was not right in denying that claim.

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