The owner need not always have the complete user of right of full ownership at all times.

SABYASACHI MUKHARJI, J.

( 1 ) THIS reference relates to the assessment year 1964-65. The assessee is a private limited company and is engaged in the construction work of huge magnitude. The assessment year, as we have stated before, is 1964-65 and the relevant accounting year ended on 30th June, 1963. The assessee got a big contract from the Vizag Port authority for over Rs. 3 crores for construction of four berths of the Port. The contract was awarded during the accounting year relevant to the assessment year under reference, though the construction continued for 3 to 4 years. In order to do this job, the assessee had intimated to the Govt. of India that it should be allowed to import special types of cranes, machinery, dumpers, etc. , from East European countries. The Government, however, insisted upon the assessee to import the aforesaid items from the U. S. A. as could be seen from the letter dated 26th June, 1961, addressed to the assessee by the Superintending Engineer, Vizag Port, The assessee, accordingly, agreed to import the aforesaid items from the USA as could be seen from its letter dated 1st July, 1961, addressed to the Chief Engineer, Vizag Port. Thereafter, in the letter dated 14th December, 1961, the Chief Engineer, Vizag Port, informed the assessee that the Govt. of India would recover the rupee equivalent of the total cost of the aforesaid items from the monthly bills submitted by the assessee and till the completion of the project the Government will have permanent Hen on the said items. We shall refer to the actual terms used in the correspondence, as a great deal of argument has been advanced before us on the expression used in those letters. On the basis of the aforesaid correspondence, the machinery including the spare parts worth Rs. 52. 65 lakhs were actually imported by the Govt. of India from the USA. The payment for the machinery was also made by the Govt. of India as per TCM procedure. The assessee was allowed to use the machinery with the stipulation that it would be transferred to the assessee on the completion of the job. The assessee showed such machinery as assets ia the balance-sheets while on the liabilities side the value of such machinery was reduced by instalments paid during the year as loan from the Govt. of India. In its return of income for the year under reference, the assessee claimed deduction of Rs. 9. 6 lakhs and Rs. 8. 05 lakhs for depreciation and development rebate in respect of the plant and machinery imported from the USA.

( 2 ) THE 1to in his order dated 5th March, 1970, after setting out the facts as well as considering the letters, was of the opinion that the assessee was not the legal owner of the machinery imported and, therefore, was not entitled to claim any depreciation as well as development rebate thereon.

( 3 ) THERE was an appeal before the AAC. The assessee reiterated its claim for deduction for depreciation and development rebate. The AAC, in his order dated 7th September, 1979, after considering at great length the arguments advanced on behalf of the assessee, accepted the assessee's claim.

( 4 ) BEING aggrieved by the order of the AAC, the Revenue went up in appeal before the Tribunal. It was argued on behalf of the Revenue after referring to the various correspondence between the assessee and the Vizag Port authority that the tenor of the correspondence did not show that there was any hire purchase agreement between the assessee and the Govt. of India in respect of the importation of the aforesaid items from the USA. It was further submitted that there was no element of outright purchase of the aforesaid items by the assessee but there was an agreement to sell, as contemplated under Section 19 of the Sale of Goods Act. It was further submitted that till the sale was finally completed the assessee did not become the owner of the aforesaid items and, therefore, was not entitled to any depreciation or development rebate. Reliance was placed on the decision

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