And<Br>The Honourable Mr. Justice P.p.s. Janarthana Raja<Br>Tax Case(Appeal) v. The Commissioner Of Income-Tax,<Br>Special Range I,<Br>Coimbatore

IN THE HIGH COURT OF JUDICATURE AT MADRAS Date:- 12.12.2005 Coram The Honourable Mr. Justice K. RAVIRAJA PANDIAN andThe Honourable Mr. Justice P.P.S. JANARTHANA RAJATax Case(Appeal) No.471 of 1999M/s. Universal Radiators Ltd.38, Mettupalayam Road,Coimbatore 641 043... Appellant..vs..The Commissioner of Income-tax,Special Range I,Coimbatore.... RespondentAppeal against the order of the Income-tax AppellateTribunal "C" Bench, Chennai dated 19.11.1998 passed in I.T.A.No.951/Mds/91 against the order of the Commissioner of Income Tax,Coimbatore dated 7.3.1991 in 1416 (54 & 55) /90-91. For Appellant : Mr. R. Meenakshisundaram The assessee, Universal Radiators Limited, Coimbatorefiled the above appeal against the order of the Income-taxAppellate Tribunal dated 19.11.1998 raising the followingsubstantial questions of law:- https://hcservices.ecourts.gov.in/hcservices/ "1. Whether the Income-tax AppellateTribunal was right in law in upholding theorder of the Commissioner of Income-tax,Coimbatore passed under Section 263 of theIncome-tax, directing the Assessing Officerto withdraw the depreciation granted to theappellant on properties allotted to it on thedissolution of the partnership firm,Universal Real Estate Agency on 30.3.1976? 2. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in holding that allotment of propertiesto the partners on the dissolution of thefirmresultintransferrequiringregistration under Section 17 of theRegistration Act, 1908, totally ignoring theprinciples to the contrary laid down by theHon'ble Supreme Court in the case reported in212 ITR 592?3.Whetheronthefactsandcircumstances of the case, the Tribunal wasright in law in holding that the Commissionerof Income-tax, Coimbatore was right inholding that the appellant was not the ownerof the property allotted to it in thedissolution of the partnership firm UniversalReal Estate Agency?" 2. The assessment year is 1986-87. The appellant is aCompany carrying on the business of manufacturing automobileradiators. The appellant entered into a partnership agreementwith Madras Radiators and Pressing Pvt. Ltd., another company andtwo other individuals namely, A.P. Madhavan and P. Sharada witheffect from 1.4.1975. Under the said agreement, the individualsMadhavan and Sharada brought into the firm the property situatedat Sanganur village consisting of factory buildings andagricultural land owned by them, whereas the two Companies madetheir contribution in cash. The firm was so formed in the name ofUniversal Real Estate Agency with effect from 1.4.1975 and thesame was subsequently dissolved with effect from 30.3.1976. 3. On the said dissolution, the properties inMettupalayam Road, Sanganur village, Coimbatore belonging to thefirm, consisting of factory building and agricultural land, wereallotted to the appellant-Universal Radiators Ltd., who were https://hcservices.ecourts.gov.in/hcservices/ running their factory in the building allotted to them, consequentto the aforesaid dissolution and claiming depreciation right fromthe assessment year 1977-78 and the same was allowed by therespondent. For the assessment year 1986-87, the appellantclaimed depreciation in respect of the factory buildings and thesame was allowed by the Deputy Commissioner of Income Tax, SpecialRange I, Coimbatore under Section 143(3) of the Income-tax Act, byan order dated 23.3.1989. 3. On the said dissolution, the properties inMettupalayam Road, Sanganur village, Coimbatore belonging to thefirm, consisting of factory building and agricultural land, wereallotted to the appellant-Universal Radiators Ltd., who were https://hcservices.ecourts.gov.in/hcservices/ running their factory in the building allotted to them, consequentto the aforesaid dissolution and claiming depreciation right fromthe assessment year 1977-78 and the same was allowed by therespondent. For the assessment year 1986-87, the appellantclaimed depreciation in respect of the factory buildings and thesame was allowed by the Deputy Commissioner of Income Tax, SpecialRange I, Coimbatore under Section 143(3) of the Income-tax Act, byan order dated 23.3.1989. 4. Subsequently, the Commissioner of Income-tax, bynotice dated 10.01.1961 issued under Section 263 of the Income-taxAct, called upon the assessee to show cause as to why theassessment made by the Assessing Officer by order dated 23.3.1989should not be revised and the Assessing Officer should not bedirected to withdraw the depreciation granted to the assessee inrespect of the property situated at Mettupalayam Road. Thoughnecessary objections have been filed, ultimately, the Commissionerrejected the same and directed the Assessing Officer to withdrawthe depreciation granted to the appellant in respect of hisproperty. That order has been carried on in an appeal by theassessee to the Tribunal. The Tribunal has also concurred withthe findings of the Commissioner and passed the order impugned inthe present appeal. 5. Learned counsel for the appellant contended that ondissolution of the partnership firm under Section 48 of thePartnership Act, 1932, the assets of the firm, including any sumscontributed by the partners to make up deficiencies of capitalshall be first complied in paying the debts of the firm to thirdparties and then paying to each partners rateably what is due tothem from the firm for advances as distinguished from the capitaland then paying to each partner rateably what is due to him onaccount of capital and then to a residue, if any, shall be dividedamong the partners in the proportion in which they were entitledto share profits. As such, there is no necessity for any formaldocument of registration of the properties and further, there isno requirement under the law to register the same under theRegistration Act. The reliance made by the Tribunal to the otherprovisions are totally extraneous to the provisions under Section32(1) of the Income-tax Act. 6. On the other hand, learned counsel for the Departmentcontended that even the first transfer made by the individuals tothe partnership firm is not in accordance with law as it is notlegally transferred, by means of registered document. In suchcircumstances, the retransfer to the assessee not supported by thedocuments under Section 17 of the Registration Act cannot beregarded as correct. 7. We heard the learned counsel appearing for theappellant and the respondent and perused the material on record.As seen from the language employed under Section 32 of the Income-tax Act, the only requirement is the person claiming depreciationis the owner of the property. The terms "own", "ownership" and"owned" were considered by the Supreme Court as generic andrelative in the decision reported in 1999 I.T.R. 775 (MYSOREMINERALS LTD. v. C.I.T.. The terms have a wide and a narrowconnotation. The meaning would depend on the context in which theterms are used. 7. We heard the learned counsel appearing for theappellant and the respondent and perused the material on record.As seen from the language employed under Section 32 of the Income-tax Act, the only requirement is the person claiming depreciationis the owner of the property. The terms "own", "ownership" and"owned" were considered by the Supreme Court as generic andrelative in the decision reported in 1999 I.T.R. 775 (MYSOREMINERALS LTD. v. C.I.T.. The terms have a wide and a narrowconnotation. The meaning would depend on the context in which theterms are used. 8. In the case of C.I.T. v. PODAR CEMENT PVT. LTD.((1997) 226 ITR 625), which has to be taken as a trend-setter inthe concept of ownership, the Supreme Court has held that the termowned as occurring in section 32(1) of the income-tax Act must beassigned a wider meaning. Anyone in possession of property in hisown title exercising such dominion over the property, as wouldenable others, being excluded therefrom and having the right touse and occupy the property and/or to enjoy its usufruct in hisown right would be the owner of the building though a formal deedof title may not have been executed and registered as contemplatedby the Transfer of Property Act, the Registration Act, etc. 9. It is worthwhile to mention here the other decisionreported in VOL.212 I.T.R. 592 S.V. CHANDRA PANDIAN v. S.V.SIVALINGA NADAR, in which for dissolution, the matter was referredto arbitration and on the basis of the award, the parties havereceived their respective properties. The question arose in thatcase was whether the non registration of the award would dis-entitle the assessee therein to claim depreciation. The SupremeCourt has held that the ownership of the property is not pre-supposed the registration of either the arbitration award or aformal document of title deed. 10. In view of the law laid down by the Supreme Court,we are of the considered view that the reasoning given by theTribunal for non suiting the appellant for claiming depreciationon the ground that on dissolution of partnership, the propertyallotted to the share of the assessee has not been registered, isnot in accordance with law, as explained by the Supreme Court andthus, the Tribunal committed an error of law. In the light of thereasoning stated by us, all the three questions are answered infavour of the assessee. 11. It is contended by the learned counsel for theappellant that in this appeal, the appellant has paid a sum ofRs.10,000/- as Court fee, but the amount payable by the assesseeis only Rs.200/-. Hence, the Registry is directed to refund thebalance amount in accordance with law, if the statement made bythe learned counsel for the petitioner is correct. ssa. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. The Commissioner of Income-tax,Special Range I,Coimbatore.2. The Section Officer,Accounts Section,High Court, Madras.(for necessary action in this regard)3. The Sub Asst Registrar,AE Section, High Court, Madras.(for necessary action) + 1 cc to Mr.N. Muralikumaran, Advocate SR No.48820+ 1 cc to Mr.Meenakshi Sundaran, Advocate SR No.48978GG(CO)SR/19.12.2005T.C. No.471 of 1999 https://hcservices.ecourts.gov.in/hcservices/