The ownership of property for the purposes of Section 32 of the I. T. Act is not to be equated with title to the property, and a person who has been put in possession of a property as a result of part performance of a contract for sale of that property can become the owner of the property for the purposes of Section 32.

( 1 ) AT the instance of the revenue, the Income-tax Appellate Tribunal, Allahabad, has, in respect of assessment of the assessee, U. P. State Agro Industrial Corporation Ltd. , Lucknow, for the assessment year 1972-73, stated the case and referred the following question for the opinion of this court:

"whether, on the facts and in the circumstances of the case, the assessee was entitled to depreciation on building which it purchased from the Government of Uttar Pradesh ?"

( 2 ) THE assessee, U. P. Agro Industrial Corporation Ltd. , Lucknow (hereinafter referred to as "the agro Corporation") was set up in the month of March, 1947, as a body registered under the indian Companies Act. Capital of the Agro Corporation was subscribed equally by the Govt. of india and the Govt. of Uttar Pradesh. The State Govt. vide its order No. 1748/xii-J-246/67, dated April 27, 1968, transferred possession over the Agricultural Workshop, Lucknow, and pilot Project, Karimganj to the Agro Corporation in consideration of Rs. 44,07,589 (Rs. 40,00,000 worth of equity shares and Rs. 4,07,589 paid in cash ). During the assessment proceedings, the Agro Corporation, inter alia, claimed allowance by way of depreciation under section 32 of the I. T. Act, in respect of the buildings taken over by it from the State Govt.

( 3 ) THE ITO disallowed the aforesaid claim for depreciation on the ground that the properties in respect of which the claim had been made were immovable properties. Since no sale deed had been executed by the State Govt. till then, the Agro Corporation did not become its owner. It was accordingly not entitled to claim any depreciation allowance in respect of such property.

( 4 ) IN appeal before the AAC, it was contended on behalf of the Agro Corporation that even though the U. P. Govt. had not transferred the immovable property by a registered deed, the properties for all practical purposes belonged to it. The Agro Corporation was the beneficial and equitable owner of the property and was in connection with its assessment entitled to claim depreciation on it. The AAC, held that in the absence of a registered sale deed, the properties in question which were immovable properties did not stand transferred to the Agro Corporation. As the properties were not owned by it, it was not entitled to claim depreciation in respect thereof.

( 5 ) IN second appeal by the Agro Corporation, the Income-tax Appellate Tribunal observed that for claiming depreciation under Section 32 it was necessary for the assessee to fulfil the following two conditions :

(1) that the assets in respect of which the depreciation is claimed by the assessee must be owned by him ; and (2) that those assets must have been used by the assessee for the purposes of his business.

( 6 ) SO far as the second condition was concerned, it was not disputed that the property in respect of which depreciation had been claimed by the assessee was being used for its business purposes. With regard to the first condition, the Tribunal referred a decision of the Supreme Court in the case of R. B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570, and held that in view of the government order dated April 27, 1968, the State of Uttar Pradesh ceased to be the owner of the properties as it could not exercise any rights in respect thereof. It observed that, viewed in the light of the Government order dated April 27, 1968, the capital structure of the Corporation, constitution of its board of directors and the fact that the Agro Corporation was in possession of the properties, the principles enunciated by the Supreme Court in the case of R. B. Jodha Mal kuthialas case[1971] 82 ITR 570, were fully applicable to the facts of the present case and it could, for purposes of Section 32 of the I. T. Act, be held that the properties were owned by the agro Corporation which was entitled to claim depreciation in respect thereof. The Tribunal further pointed out that the property in respect of which the Agro