Court decree declaring title in suit property did not need registration and supported depreciation claim under tax law.

A civil court decree based on admissions, declaring title to immovable property that formed part of the suit, did not require registration under section 17 of the Registration Act because it fell within the statutory exemption for court decrees and was not a compromise decree dealing with -suit property. On that basis, the assessee was treated as the owner of the property for depreciation purposes under section 32 of the Income-tax Act, since the asset was used in business and ownership could pass through the decree and related facts without a registered sale deed. The depreciation claim was therefore upheld.

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Issues: (i) Whether a civil court decree based on admission, declaring ownership in immovable property forming part of the suit, required registration under the Registration Act; (ii) Whether the assessee, on the basis of such decree and the surrounding facts, was entitled to depreciation under section 32 of the Income-tax Act, 1961.

Issue (i): Whether a civil court decree based on admission, declaring ownership in immovable property forming part of the suit, required registration under the Registration Act.

Analysis: Section 17(1)(b) and (c) of the Indian Registration Act, 1908 apply to non-testamentary instruments creating or declaring rights in immovable property of the prescribed value, but section 17(2)(vi) exempts decrees and orders of a court, except where the decree is a compromise decree dealing with property outside the subject-matter of the suit. The decree here was founded on admissions and concerned property that formed part of the suit; it was not a compromise device falling within the exception to the exemption. The decree therefore did not require registration.

Conclusion: The decree did not require registration and was effective to declare ownership in favour of the assessee.

Issue (ii): Whether the assessee, on the basis of such decree and the surrounding facts, was entitled to depreciation under section 32 of the Income-tax Act, 1961.

Analysis: Depreciation under section 32 is available where the asset is owned by the assessee and used for business. The asset was used in the assessee's business, and ownership had passed by virtue of the decree, which related back to the agreement between the parties. A registered sale deed was not indispensable in the circumstances because ownership could be acquired by court decree and other recognised modes of transfer. The assessee was therefore the lawful owner for purposes of section 32.

Conclusion: The assessee was entitled to depreciation under section 32.

Final Conclusion: The reference was answered against the Revenue, with the assessee held to be the lawful owner of the property and entitled to the claimed depreciation for the relevant assessment years.

Ratio Decidendi: A decree declaring title to immovable property forming the subject-matter of the suit, when not requiring registration under section 17 of the Registration Act, can confer ownership for the purpose of depreciation under section 32 of the Income-tax Act.

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