High Court upholds depreciation claim for property despite unregistered deed

The High Court of Andhra Pradesh ruled in favor of the private limited company, allowing depreciation claims for a building in Bombay despite an unregistered conveyance deed. The Court emphasized that ownership, as per the Income-tax Act, must entitle the owner to income from the property, not just a beneficial interest. Citing precedent cases and other High Court rulings, the Court upheld the company's entitlement to depreciation, rejecting the Revenue's argument based on a different case. Ultimately, the Court aligned with previous judgments and supported the company's claim for depreciation under section 32(1) of the Income-tax Act, 1961.

---

---

Issues involved: Interpretation of ownership for claiming depreciation u/s 32(1) of the Income-tax Act, 1961 for a building in Bombay purchased by a private limited company.

Summary:
The High Court of Andhra Pradesh considered the issue of whether the assessee, a private limited company, was entitled to depreciation for a building in Bombay purchased in 1971 but with an unregistered conveyance deed. The Income-tax Officer initially rejected the claim, stating the assessee did not become the owner due to lack of registration. However, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld the claim based on previous decisions. The Tribunal cited precedents like R. B. Jodha Mal Kuthiala v. CIT and CIT v. Bijli Cotton Mills Ltd. to support the assessee's ownership and entitlement to depreciation.

In analyzing the ownership aspect, the Court referred to section 22 of the Income-tax Act, 1961, which deals with income from house property, and section 32(1) regarding depreciation for owned buildings used for business purposes. Citing R. B. Jodha Mal Kuthiala v. CIT, the Court emphasized that the owner must be the one entitled to income from the property, not merely having a beneficial interest. The Court also highlighted the practical implications of interpreting ownership, as seen in the case of evacuees' properties in Pakistan.

The Court noted its previous decision in favor of the assessee in a similar case and referenced rulings from other High Courts supporting the interpretation of ownership for depreciation claims. The Revenue's argument, citing Nawab Sir Mir Osman Ali Khan v. CWT, was countered by reaffirming the principles established in R. B. Jodha Mal Kuthiala v. CIT. Ultimately, the Court ruled in favor of the assessee, aligning with previous judgments and upholding the entitlement to depreciation.

---