1. Dispute over entitlement to depreciation and development rebate under Section 32 of the Income-tax Act, 1961. (Para 1 )
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2000 Supreme(SC) 1959
SUPREME COURT OF INDIA
N.Santosh Hegde : S.P.Bharucha : Y.K.Sabharwal
Tamil Nadu Civil Supplies Corpn.Limited
Versus
Commr.Of Income-tax, T.N
Case No. : 1288 of 1998
Date of Decision : 12/5/00
To claim depreciation under Section 32 of the Income-tax Act, 1961, the assessee must establish ownership or have acquired dominion over the assets used for business purposes.
Headnote:(A) Income-tax Act, 1961 - Section 32 - Depreciation and development rebate - Interpretation of word 'owned' - For the purpose of claiming depreciation on assets used for business, the assessee must be shown to have acquired dominion over the assets. (Para 2)
Facts of the case:
The assessee sought depreciation and/or development rebate for assessment years 1973-74 and 1974-75. The claim was rejected by the tax authorities and the Tribunal and subsequently dismissed by the High Court. The assessee contended that they were entitled to the claim based on the principle that dominion over the assets, rather than a formal deed of conveyance, suffices to satisfy the requirement of ownership for depreciation purposes.
Findings of Court:
The court observed that there was no evidence on record, nor any finding by the Tribunal, to suggest that the assessee had acquired dominion over the mills in question. (Para 3)
Issues: Whether the assessee is entitled to depreciation and/or development rebate as claimed in respect of assessment years 1973-74 and 1974-75. (Para 1)
Ratio Decidendi: The entitlement to depreciation under Section 32 is contingent upon the assessee establishing ownership or dominion over the relevant assets. Since no such dominion over the mills was established in the facts of the case, the claim for depreciation could not be upheld. (Para 3)
Result: Appeal is dismissed with costs. (Para 4)
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2. Assessee argued broad interpretation of "owned" in Section 32; Revenue disputed dominion over the mills. (Para 2 , 3 )
3. No evidence that assessee had acquired dominion over the mills; Tribunal made no such finding. (Para 3 )
4. Depreciation under Section 32 requires assessee to have acquired dominion over the asset. (Para 2 , 3 )
5. Appeal dismissed with costs. (Para 4 )
6. What is required for a taxpayer to claim depreciation under Section 32 of the Income-tax Act, 1961?
The taxpayer must have acquired ownership or dominion over the asset, not merely made part payment or obtained possession. (Para 2 , 3 )
S.P.BHARUCHA, J.
(1) THE question for consideration in this appeal by the assessee against the judgment and order of a Division Bench of the High Court at Madras reads thus :
"(1) Whether, on the facts and in the circumstances of the case, the petitioner is entitled to depreciation and/or development rebate as claimed in respect of assessment years 1973-74 and 1974-75?"
The High Court answered the question in the negative and against the assessee. The authorities and the Tribunal had also taken the view that the assessee was not entitled to depreciation under Section 32 of the Income-tax Act, 1961 for the two assessment years in question, namely. Assessment Years 1973-74 and 1974-75, the previous years whereof ended on 31/03/1973 and 31/03/1974 respectively.
(2) LEARNED counsel on behalf of the assessee has placed great emphasis upon the decision of this Court in Mysore Minerals Ltd. v. Commissioner of Income- tax [239 ITR 775] which has interpreted the word owned in Section 32 broadly. It did so in the following circumstances: The assessee before it had purchased certain houses from the Housing Board and had made part payment thereof. It had acquired possession of the houses but the deed of conveyance was not executed until after the financial year in question. Even so, the assessees claim for depreciation of the buildings, which it had used for the purpose of its business, was upheld on the basis that it had acquired dominion over the buildings.
(3) WE will assume the correctness of the judgment but, on the facts found, it is not possible to reach the conclusion that the assessee had acquired dominion over the mills in question. There is nothing on the record which indicates this nor is that the finding of the Tribunal.
(4) IN the circumstances, the appeal is dismissed with costs.
