Legal ownership required for depreciation on immovable property; possession and payment alone do not establish title.

Depreciation on buildings under section 32(1) is available only to the legal owner of the property. Payment of consideration and possession of flats or buildings do not, by themselves, create ownership where title has not passed through a registered conveyance. Because compulsory registration is required for transfer of immovable property of the relevant value, an unregistered conveyance does not pass right, title or interest. On that basis, the assessee was not treated as the owner in the legal sense required for depreciation, and the claim was disallowed.

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Issues: Whether depreciation under section 32(1) of the Income-tax Act, 1961 is available to an assessee who has paid consideration and is in possession of flats and buildings, but whose title has not passed by a registered conveyance.

Analysis: Depreciation on buildings is allowable only in respect of property owned by the assessee. Under the registration law, a transfer of immovable property of the relevant value requires compulsory registration, and an unregistered conveyance does not pass right, title or interest in the property. Possession and payment of consideration, by themselves, do not substitute for a valid registered transfer. The authorities relied on by the assessee were distinguished on their facts, and the Supreme Court's discussion of ownership in fiscal statutes was treated as consistent with the requirement of a valid transfer for legal ownership.

Conclusion: The assessee was not the owner of the flats and buildings in the legal sense required by section 32(1), and depreciation was not allowable. The question was answered in the negative, in favour of the Revenue and against the assessee.

Final Conclusion: The reference was decided by holding that legal ownership through a valid registered conveyance is necessary to claim depreciation on immovable property.

Ratio Decidendi: For depreciation under section 32(1), the assessee must be the legal owner of the building or property, and ownership is not established merely by payment of consideration and possession when title has not passed through a registered conveyance.

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