Beneficial ownership of machinery governed depreciation and development rebate where contract terms showed the assessee bore the real ownership burden.

Ownership for depreciation and development rebate depends on the real nature of the transaction and the parties' intention as to when property in specific goods passes under section 19 of the Sale of Goods Act. Where machinery was imported for the assessee's contract, used in its business, with cost recoverable from the assessee and the Government's lien operating only as security until payment and completion, the machinery was treated as belonging to the assessee in substance. The balance-sheet treatment also supported that conclusion. The assessee was therefore regarded as owner for sections 32 and 33 of the Income-tax Act, 1961, and was entitled to depreciation and development rebate.

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Issues: Whether the assessee was the legal owner of the plant and machinery imported from the USA for the purposes of depreciation and development rebate under sections 32 and 33 of the Income-tax Act, 1961.

Analysis: The correspondence between the parties showed that the machinery was imported for the assessee's contract, the assessee was to use the machinery in the business, the cost was to be recovered from the assessee, and the Government's lien was only a security arrangement until payment and completion of the work. The Court applied the principle that ownership must be understood in the context of the transaction and the intention of the parties as to when property in specific goods was to pass under section 19 of the Sale of Goods Act. On the facts, the machinery was treated as belonging to the assessee for real and practical purposes, and the balance-sheet treatment also supported that conclusion.

Conclusion: The assessee was the owner of the machinery for the purpose of sections 32 and 33 of the Income-tax Act, 1961, and was entitled to depreciation and development rebate.

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