Beneficial ownership, business use and consistent accounting treatment supported deductions, while section 43B(f) did not apply here.

Beneficial ownership and business use may support depreciation on office premises even where formal conveyance remains incomplete; on those facts, the absence of a registered deed was not treated as decisive. Expenditure on installing an electricity sub-station was treated as allowable because it was incurred wholly for business purposes, and the alternative claim for revenue deduction was accepted despite the asset being owned by the electricity board. Interest on advances was not brought to tax separately where it had consistently been reduced from project cost and capitalised as work-in-progress. Section 43B(f) was held inapplicable because the leave encashment amount was not claimed as a deductible liability.

---

---

Issues: (i) Whether depreciation was allowable on office space occupied by the assessee in the NBCC building despite absence of a formal conveyance deed; (ii) whether depreciation or, alternatively, revenue deduction was allowable on expenditure incurred for installation of an electric sub-station owned by the Delhi Vidyut Board; (iii) whether miscellaneous income comprising interest on advances could be excluded from taxable income where it was capitalized as part of work-in-progress in a consistently followed method; (iv) whether the provision for leave encashment was disallowable under section 43B(f) when it had not been claimed as a revenue deduction.

Issue (i): Whether depreciation was allowable on office space occupied by the assessee in the NBCC building despite absence of a formal conveyance deed.

Analysis: The assessee had paid consideration for the office space, occupied it for business purposes, and the surrounding facts showed that the property was allotted through the Government and that formal conveyance formalities remained pending. The beneficial ownership and rights of part performance were treated as sufficient for depreciation, and the absence of a registered deed was not decisive on those facts.

Conclusion: Depreciation was held allowable and the disallowance was deleted in favour of the assessee.

Issue (ii): Whether depreciation or, alternatively, revenue deduction was allowable on expenditure incurred for installation of an electric sub-station owned by the Delhi Vidyut Board.

Analysis: The expenditure was incurred wholly and exclusively for business use. Even if the assessee had treated the outlay as capital and claimed depreciation, the alternative plea supported allowance of the entire amount as revenue expenditure. The ownership of the sub-station with the electricity board did not defeat deduction where the expenditure was business-linked and otherwise allowable.

Conclusion: The deletion of the disallowance was upheld and the claim was decided in favour of the assessee.

Issue (iii): Whether miscellaneous income comprising interest on advances could be excluded from taxable income where it was capitalized as part of work-in-progress in a consistently followed method.

Analysis: The interest on advances formed part of the miscellaneous income schedule, but the assessee had consistently reduced such receipts from project cost and treated them as attributable to construction work. Since the method was regularly followed and the receipts were linked to capital work in progress, there was no basis to disturb the treatment adopted by the assessee.

Conclusion: The addition was deleted and the issue was decided in favour of the assessee.

Issue (iv): Whether the provision for leave encashment was disallowable under section 43B(f) when it had not been claimed as a revenue deduction.

Analysis: Section 43B applies where a deduction is claimed on an amount payable by way of leave encashment but actual payment has not been made. On the facts, the amount was not claimed as an allowable deduction in the manner assumed by the Assessing Officer, and the section therefore had no application.

Conclusion: The disallowance was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The Tribunal sustained the relief granted by the first appellate authority on all contested additions and the Revenue's appeal failed in entirety.

Ratio Decidendi: For depreciation and allied tax deductions, beneficial ownership and business use may suffice where formal title is incomplete, business-incurred expenditure may be allowed on an alternative revenue basis, consistently followed capitalization of project-related receipts will not be disturbed without reason, and section 43B cannot be invoked unless the disputed amount is actually claimed as a deductible liability.

---