A division of Delhi High Court recently ruled that, assessee is entitled to depreciation under Section 32 of the Income Tax Act even when the assessee was not the owner of the property in question and was in possession thereof as a lessee.
The assessee M/S Bhushan Steels & Strips Ltd had entered into a lease agreement with M/s Nehru Place Hotels Limited on 16.04.1993. It also stated that on the next day i.e. 17.04.1993 an agreement between that owner/ vendor and the assessee was entered into. The lease deed, which is prior in point of time, stated that the tenure of the lease was three years, renewable at the option of the assessee by another three years.
The Income Tax Appellate Tribunal, which delivered the impugned judgment, reversed the reasoning of the authorities taking note of the Supreme Court judgment in CIT vs. Podar Cement (P) Ltd. Apart from noticing the ratio in Podar Cement case, the Tribunal also held that non-registration of the agreement did not imply that the benefit otherwise available under Section 53A of the Transfer of Property Act, 1882 of being entitled to continue in possession in part performance of an agreement to sell, had to be denied.
The Court also relied on Mysore Minerals Ltd. vs CIT in the context of Section 32 of the Act itself.
While upholding the Income Tax Appellate Tribunal’s decision, the division bench comprising of Justice S.Ravindra Bhat and Justice Najimi Waziri observed that, “Having regard to the clear declaration of law by the Supreme Court in the two judgments discussed, we are of the opinion that the view expressed by the Tribunal in favour of the assessee does not call for any disturbance. Consequently, the question of law framed is answered against the Revenue”.
Read the full text of the Judgment below.
