Strict construction of depreciation entries denied higher allowance for an unregistered building and borewell drilling machinery.

Depreciation is available only where the assessee satisfies the statutory ownership and user conditions strictly. A building could not qualify because title had not passed for depreciation purposes until registration, so mere possession or use was insufficient. Drilling machines used for boring borewells also did not fall within the entry for earth-moving machinery used in heavy construction works such as dams, tunnels and canals, because that category could not be widened to machinery serving a materially different purpose. The higher depreciation claim was therefore rejected on both items in favour of the Revenue.

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Issues: (i) Whether the assessee was entitled to depreciation on the building on the footing that title had passed before registration. (ii) Whether drilling machines used for boring borewells fell within earth-moving machinery employed in heavy construction works under the relevant depreciation entry.

Issue (i): Whether the assessee was entitled to depreciation on the building on the footing that title had passed before registration.

Analysis: The question turned on whether the assessee had become the legal owner of the property during the relevant accounting year. Applying the effect of Section 47 of the Indian Registration Act and the earlier binding decision on the same issue, the transfer could not be treated as conferring ownership for the purpose of depreciation until registration. Since depreciation is allowable only to the owner, mere user of the building was insufficient.

Conclusion: The assessee was not entitled to depreciation on the building; the answer is against the assessee and in favour of the Revenue.

Issue (ii): Whether drilling machines used for boring borewells fell within earth-moving machinery employed in heavy construction works under the relevant depreciation entry.

Analysis: The entry covered earth-moving machinery used in heavy construction works such as dams, tunnels and canals. The machinery had to be not only capable of moving earth, but also of a kind ordinarily used in large-scale excavation for major construction works. Drilling rigs used for boring borewells for agricultural purposes did not satisfy that requirement. The broad word "etc." in the entry was read as extending only to similar heavy construction works, not to different kinds of machinery. The higher rate of depreciation was therefore unavailable.

Conclusion: Drilling machines used for boring borewells did not qualify for depreciation at 30%; the answer is against the assessee and in favour of the Revenue.

Final Conclusion: The references were answered for the Revenue, and the assessee was held not entitled to the higher depreciation claimed on either the building or the drilling machinery.

Ratio Decidendi: Depreciation at a special rate is allowable only when the asset strictly satisfies the terms of the relevant entry, and a taxing entry describing machinery by both its nature and its user cannot be widened to cover machinery used for a materially different purpose.

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