Acquisition of office property can be complete on contractual crystallisation and payment, but depreciation still requires actual user.

For Section 50(1)(iii), acquisition of an office building was treated as complete when the allotment letter fixed the essential terms, consideration was fully paid, rights under the agreement crystallised, and fit-out activity commenced, even though formal possession or actual use had not begun. The addition under Section 50 was therefore deleted. For depreciation under Section 32, ownership alone was insufficient because the building and machinery were not put to use before the close of the previous year; mere availability for fit-outs did not satisfy the user requirement. The disallowance of depreciation was sustained, resulting in partial relief to the assessee.

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Issues: (i) Whether the assessee acquired the office building during the relevant previous year for the purpose of Section 50(1)(iii) of the Income-tax Act, 1961. (ii) Whether the assessee was entitled to depreciation on the building and machinery under Section 32 of the Income-tax Act, 1961.

Issue (i): Whether the assessee acquired the office building during the relevant previous year for the purpose of Section 50(1)(iii) of the Income-tax Act, 1961.

Analysis: The allotment letter contained the essential terms of the bargain and constituted an agreement for acquisition. The builder's correspondence and the part-occupancy certificates showed that the structure existed and that the property was handed over for fit-outs during the relevant year. Payment of the full consideration, coupled with the crystallisation of rights under the agreement and commencement of fit-out activity, was sufficient to constitute acquisition. Section 50(1)(iii) does not require actual use of the property for completion of acquisition.

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

Issue (ii): Whether the assessee was entitled to depreciation on the building and machinery under Section 32 of the Income-tax Act, 1961.

Analysis: Depreciation under Section 32 requires ownership and user. The assessee itself ed that the property and machinery were not put to use before the close of the previous year, and mere availability for fit-outs did not amount to use.

Conclusion: The issue was decided against the assessee.

Final Conclusion: The addition made under Section 50 was deleted, but the disallowance of depreciation on the building and machinery was sustained, resulting in partial relief to the assessee.

Ratio Decidendi: For the purposes of Section 50(1)(iii), acquisition is complete when contractual rights in the property crystallise and the buyer has effectively taken over the property by paying the consideration and acting upon the agreement, even if formal possession or actual use has not commenced; however, depreciation under Section 32 still requires user of the asset.

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