INCOME TAX OFFICER v. TARUK PLASTICS PVT. LTD
[Citation -1985-LL-1125-4]

Citation 1985-LL-1125-4
Appellant Name INCOME TAX OFFICER
Respondent Name TARUK PLASTICS PVT. LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 25/11/1985
Assessment Year 1981-82, 1982-83
Judgment View Judgment
Keyword Tags private limited company • capital expenditure • managing director • state government • cold storage • legal owner
Bot Summary: 3rd Jan., 1979 and since according to the ITO the allotment was not transferable for a period of 15 year, it was held that the ownership over the shed continued with Shri Atul Malhtora and that the company was not entitled to depreciation under the provisions of s. 32 of the IT Act, 1961. 5th Jan., 1983, Shri Chakraborty submits that the allotment of the shed having been transferred to the company w.e.f. 5th Jan., 1983 only, it was not the legal owner of the shed in the two assessment years under consideration and it was not entitled to any depreciation under the provisions of s. 32 of the IT Act, 1961. Authorised counsel of the assessee-respondent has taken us through a paper book consisting of 16 pages and stated the relevant facts in order to canvass that even though the shed had been formally allotted to Atul Mallhotra, Director of Company, the ownership thereof and in any case the occupancy thereof was with the assessee-company. Of the letter of allotment, the fact could not be denied that the lease hold rights and the rights of occupancy of the shed had been obtained by the company although the initial allottee of the shed was Mr. Atul Malhotra. After considering the rival submissions and after taking into account the provisions of ss.32 and 32(1A) of the IT Act and after perusing the facts as are evidenced from the papers submitted on the side of the assessee it does appear to us that even though the formal allottee of the shed was Shri Atul Malhotra, the rights of occupancy in the shed had been right from the very beginning enjoyed by the assessee-company which had carried on business in that shed. 5th Nov., 1983, the fact remains that the occupancy rights of the shed vested in the company right from the beginning. Since the facts brought on record clearly indicate that right from the very beginning the shed had been occupied by the assessee-company for the purposes of its own business and since at the time of the allotment of the shed in the name of the director named Shri Atul Malhotra, the arrangement was that the company was to have the rights of enjoyment over the shed and that Shri Atul Malhotra was to be the nominal of the companey, merely, we would agree with the conclusion reached by the CIT that depreciation was allowable to the assessee in respect of the total value of the shed and building constructed thereon.


These two appeals by revenue raising identical grounds may be conveniently consolidated and decided by common order. In asst. yrs. 1981-82 and 1982-83, assessee, private limited company had claimed depreciation on building (shed) situated at No. 40 Focal Point, Rajpura, since Director of Industries, Punjab, had allotted shed to o n e Shri Atul Mallhotra, director of assessee-company and not to company itself vide letter of allotment dt. 3rd Jan., 1979 and since according to ITO allotment was not transferable for period of 15 year, it was held that ownership over shed continued with Shri Atul Malhtora and that, therefore, company was not entitled to depreciation under provisions of s. 32 of IT Act, 1961. assessee s plea that allotment had been vested in name of company was rejected by ITO as according to him in two assessment years under consideration assessee-company was not owner and ownership vested in Shri Atul Malhotra. When appeals had been filed against assessments made in asst. yrs. 1981-82 & 1982-83, t h e CIT (A) had agreed with representation made on side of assessee. Shri M. K. Chakraborty, ld. Departmental Representative has very vehemently criticised order passed by CIT (A). According to him, CIT (A) had no justification in granting depreciation to assessee-company in respect of shed No.40 at Focal Point Rajura without giving any reasons is support of his finding. It is further contended that ownership of above mentioned property did not vest in assessee but it vested in Shri Atul Malhotra, in asst. yrs. 1981-82 and 1982-83. Referring to letter of Director of Industries dt. 5th Jan., 1983, Shri Chakraborty submits that allotment of shed having been transferred to company w.e.f. 5th Jan., 1983 only, it was not legal owner of shed in two assessment years under consideration and, therefore, it was not entitled to any depreciation under provisions of s. 32 of IT Act, 1961. In support of his contentions, Departmental Representative has relied on decisions reported in CIT vs. Ganga Properties Ltd. (1970) 77 ITR 637 (Cal) and CIT vs. Hindustan Cold Storage and Refrigeration P. Ltd. 1976 CTR (Del) 78: (1976) 103 ITR 455 (Del) On other hand, Shri D. S. Gupta, advocate ld. authorised counsel of assessee-respondent has taken us through paper book consisting of 16 pages and stated relevant facts in order to canvass that even though shed had been formally allotted to Atul Mallhotra, Director of Company, ownership thereof and in any case occupancy thereof was with assessee-company. Referring to resolution passed in meeting of Board of Directors on 9th Feb., 1979, ld. counsel submits that right from very beginning when application for allotment was made by Shri Atul Malhotra on 21st Nov., 1978, stipulation was that instalments in respect of shed shall be paid by company and Shri Atul Malhotra will be merely nominee of company. Further referring to balance sheet for period ending 30th June, 1979, directors report and schedule of notes forming part of balance sheet, ld. counsel submits that all rights in shed of ownership and occupancy actually vested in company itself which had paid for shed and construction of building thereon. Referring to letter of Director of Industries dt. 5th Jan., 1983. ld. counsel contends that when allotment was changed in name of company it retrospectively applied from date on which allotment had been made. After taking us through letter of allotment dt. 3rd Jan., 1979, ld. counsel submits that even through ownership of shed was to vest in State Government as per cl. (xiii) of letter of allotment, fact could not be denied that lease hold rights and rights of occupancy of shed had been obtained by company although initial allottee of shed was Mr. Atul Malhotra. After considering rival submissions and after taking into account provisions of ss.32 and 32(1A) of IT Act and after perusing facts as are evidenced from papers submitted on side of assessee it does appear to us that even though formal allottee of shed was Shri Atul Malhotra, rights of occupancy in shed had been right from very beginning enjoyed by assessee-company which had carried on business in that shed. resolution dt. 9th Feb., 1979 as well as balance sheet for period ending 30th June, 1979 evidence that fact. It is common phenomena that limited companies acquired properties in names of Managing Director or directors and, therefore, when Shei Atul Malhotra applied for allotment of shed, arrangement was that property in shed would belong to assessee-company and not to Shri Atul Malhotra, individual. Even though formal allotment had been changed in name of company only by letter dt. 5th Nov., 1983, fact remains that occupancy rights of shed vested in company right from beginning. In light of these facts, it appears to us that case of assessee-company claiming depreciation ion shed and building constructed thereon would be covered by provisions of s. 32 (1A) of IT Act, 1961 which were brought on statue book w.e.f. 1st April, 1971. It is provided in this section that where business is carried on in property or building which is not owned by assessee but in respect of which assessee holds lease or other rights of occupancy, capital expenditure incurred in respect of that building or property would be eligible for depreciation. Since facts brought on record clearly indicate that right from very beginning shed had been occupied by assessee-company for purposes of its own business and since at time of allotment of shed in name of director named Shri Atul Malhotra, arrangement was that company was to have rights of enjoyment over shed and that Shri Atul Malhotra was to be nominal of companey, merely, we would agree with conclusion reached by CIT (A) that depreciation was allowable to assessee in respect of total value of shed and building constructed thereon. reliance placed by learned Departmental Representative on decision reported in (1976) 103 ITR 455 and (1970) 77 ITR 637 (Cal) does not help case of Department in view of facts found in present case which are wholly different from facts which prevailed in above mentioned two cases. In conclusion, appeals fail. *** INCOME TAX OFFICER v. TARUK PLASTICS PVT. LTD.
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