Depreciation on beneficial ownership under a lease-cum-sale arrangement is allowable even without registered legal title.

Depreciation under Section 32 is not confined to formal registered legal title where the assessee has substantial consideration, possession, and beneficial control under a lease-cum-sale arrangement. Applying Podar Cement and Mysore Minerals, the Delhi HC treated "owned" as covering a person who has dominion over the property, is entitled to use it in its own right, and uses it for business purposes. The Court also accepted that Section 53A of the Transfer of Property Act supported the assessee's continued possession and beneficial interest. Depreciation was therefore allowable despite the absence of registered legal ownership.

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Issues: Whether depreciation under Section 32 of the Income-tax Act, 1961 is allowable to an assessee who is in possession of the property under a lease-cum-sale arrangement but is not the registered legal owner of the property.

Analysis: The Court noted that the assessee had paid substantial consideration, was put in possession, and the later agreement adjusted the deposit towards the purchase price, indicating that the arrangement was not a mere lease in isolation. It relied on the principles stated in Podar Cement and Mysore Minerals that for the purpose of depreciation, ownership under Section 32 is not confined to formal legal title, but extends to the person who has dominion over the property, is entitled to use it in its own right, and uses it for business purposes. The Court also accepted that the effect of Section 53A of the Transfer of Property Act, 1882 supported the assessee's continued possession and beneficial interest in the property.

Conclusion: Depreciation was allowable to the assessee despite absence of registered legal title, and the issue was decided in favour of the assessee.

Ratio Decidendi: For the purposes of depreciation under Section 32, the expression "owned" includes a person who has dominion over the property and uses it in its own right for business, even if formal legal title has not yet been conveyed.

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