JUDGMENT JUDGMENT All these three references under section 256(1) of Income-tax Act, 1961 (hereinafter referred to as " Act "), are at instance of assessee for decision of some common questions of law. five questions of law referred in Reference No. 16 of 1978 are questions Nos. 1 to 5 in Reference No. 24 of 1978 and remaining question No. 6 in Reference No. 24 of 1978 is merely consequential. only question referred in Reference No. 25 of 1978 is question No. 3 in Reference No. 16 of 1978. This is how all these references involve same questions relating to same assessee in respect of different periods of assessment. Reference No. 16 of 1978 pertains to assessment year 1965-66 for which accounting period ended on March 31, 1965. Reference No. 24 of 1978 relates to assessment year 1966-67 for which accounting period ended on March 31, 1966. Reference No. 25 of 1978 relates to assessment years 1959-60 and 1960-61 for which accounting periods ended on March 31, 1959, and March 31, 1960, respectively. remaining material facts which are common are stated hereunder. assessee, M/s Golcha Properties (P.) Ltd., went into voluntary liquidation on July 4, 1966. Pending proceedings of winding up, its affairs were looked after by official liquidator with effect from May 10, 1968. Income-tax Officer applied to company court under section 446 of Companies Act, 1956, to proceed with assessment of company in respect of assessment years 1965-66 and 1966-67. company court has stayed assessment proceedings resulting in extension of time for completion of assessment. Admittedly, assessment was completed in respect of both assessment years within extended period. Revenue placed reliance on provisions of Explanation to sub-section (1) of section 153 of Act for contending that assessment for these years has been completed within prescribed period of limitation. company had been carrying on business of exhibiting films in cinema house known as Maratha Mandir at Bombay and Golcha Cinema at Delhi. It is contended that it was industrial company and was, therefore, entitled to concessional rates of income-tax by Finance Act, 1975. assessee claimed benefit available to industrial company under this provision on ground that its business of exhibiting films amounted to business of processing of goods which was one of requirements for treating it as industrial company under Finance Act, 1965. assessee had entered into agreement with M/s Maratha Mandir Pvt. Ltd., on October 31,1955, according to which it was to complete construction of cinema building undertaken by Maratha Mandir Pvt. Ltd., and which had remained incomplete for want of finance. agreement further provided that assessee could be entitled to manage his cinema theatre for period of 20 years on terms and conditions contained in this agreement after which entire immovable property along with plant, machinery, etc., fitted therein would revert to Maratha Mandir Pvt. Ltd. There was also some litigation between parties which related to consent decree passed on February 25, 1959, in civil suit at Bombay. terms of that decree also regulated jural relationship between assessee and Maratha Mandir Pvt. Ltd. in respect of cinema theatre known as Maratha Mandir at Bombay. assessee claimed depreciation and certain other deductions in respect of expenditure incurred by it under terms of this contract. Income-tax Officer disallowed assessee's claim and assessee's further appeals to Appellate Assistant Commissioner and then to Tribunal also failed. Aggrieved by decision of Tribunal, assessee applied for reference under section 256(1) of Act which has led to reference of certain questions of law in respect of aforesaid assessment years. questions of law referred for decision by this court in these three references are as follows: " 1. Whether, on facts and in circumstances of case, Tribunal was justified in holding that assessment order for assessment year 1965-66 did not become time-barred under sub-section (1) of section 153 of Income-tax Act, 1961, in view of provisions of Explanation I to said section? 2. Whether, on facts and in circumstances of case, Tribunal was justified in holding that assessee-company is not industrial company? 3. Whether, on facts and in circumstances of case, and on correct interpretation of terms of agreement dated October 31, 1955, and consent decree dated February 25, 1959, Tribunal is justified in holding that assessee is not owner of cinema styled as Maratha Mandir and machinery, plant, furniture, etc., installed in said building by assessee-company with its own finances and no depreciation and development rebate are available to it in respect thereto? 4. Whether, on facts and in circumstances of case, Income- tax Appellate Tribunal was justified in rejecting alternative contention of assessee that amount of Rs. 20,000 spent by assessee-company on construction of cinema known as Maratha Mandir and in purchasing various movable assets installed therein out of its own funds, is neither capital nor revenue expenditure? 5. Whether, on facts and in circumstances of case, Tribunal was justified in holding that interest income of Rs. 1,15,684 had accrued and arisen to assessee-company on its loans given to M/s Golcha Properties Pvt. Ltd., Nepalganj, Nepal, and that resolution passed by assessee-company on June 22, 1965, did not have effect of making said income non-existent in accounting period corresponding to assessment year 1965-66?" We shall deal with questions referred in Reference No. 16 of 1978 which could cover question referred in other two references as well. first question relates to limitation for completing assessment proceedings in respect of assessment years 1965-66 and 1966-67. There is no controversy that company court had stayed completion of assessment proceedings by passing appropriate order in proceedings for winding up before it and final order of assessment was passed by Income-tax Officer within extended period in each case. It is also claimed that company court had clearly mentioned in that order that same was made as required by Explanation I to section 153 of Act. This Explanation says that in computing period of limitation for purposes of this section prescribing time-limit for completion of assessment, period during which assessment proceeding is stayed, by order or injunction by court shall be excluded. There is thus no escape from conclusion that assessment having been completed within period prescribed after excluding period of stay in computing period of limitation, there was no defect of limitation attached to it. first question has, therefore, to be answered in affirmative and in favour of Revenue. second question relates to benefit claimed by assessee as industrial company under Finance Act, 1965. As already indicated, this claim of company was based wholly on ground that its business of exhibiting films was business of processing of goods. Reliance was placed on provision only to this extent for claiming this benefit. Tribunal has by cogent reasons intimated as to why this contention be not accepted. expression " processing of goods " cannot cover business activity of exhibiting films for obvious reason that there is no change undergone in films which are merely projected on screen for public view. expression " processing of goods " necessarily contemplates some kind of change in goods itself which is obviously non-existing in process of exhibiting films. Tribunal, therefore, was justified in rejecting assessee's claim on this point as well. This question also has to be answered in favour of Revenue. Question No. 3 relates to assessee's claim for depreciation under section 32(1) of Act which gives benefit of depreciation in respect of buildings, machinery, plant or furniture " owned by assessee and used for purposes of business or profession ". contention of assessee is that amount spent by it in completing construction of cinema hall known as Maratha Mandir and in installing machinery, etc., therein is covered by this provision and, therefore, assessee is entitled to claim depreciation thereon. contention of assessee is that entire superstructure constructed by assessee in accordance with terms of agreement dated October 30, 1955, and consent decree dated February 25, 1959, and plant and machinery installed therein for purpose of carrying on cinema business, were owned by assessee and used for purposes of business or profession and, therefore, benefit of section 32(1) of Act has to be given. real controversy in present case is with regard to absence of word " owned " occurring in sub-section (1) of section 32 of Act since user of building, plant and machinery, etc., by assessee does not appear to be disputable. However, benefit of this depreciation can be given to assessee only if same was also owned by assessee. question really is whether expression "owned by assessee" occurring in sub-section (1) of section 32 of Act means exclusive ownership or merely limited ownership so that limited owner using same for purposes of business or profession can also claim benefit of this provision. Ordinarily, word " owned " would mean exclusive ownership or, in other words, right to user of property to exclusion of all others which obviously does not take within its ambit limited owner. There is nothing in context in which expression is used which may indicate that provision was intended to apply (sic). plain meaning of sub-section (1) of section 32 of Act is that if such building, machinery, plant or furniture belongs to assessee as owner and is also used for purposes of his business or profession, then he would be entitled to benefit of depreciation provided therein. In other words, such property of owner which he uses himself for purposes of his business or profession alone qualify for benefit of this provision. Unless all these conditions co-exist, sub-section (1) of section 32 of Act is not attracted. Sub-section (1A) was inserted in section 32 of Act subsequently with effect from 1 st April, 1971, whereby this benefit has also been extended to lessee or person having any other right of occupancy. opening words of sub-section (1A) are " where business or profession is carried on in building not owned by assessee but in respect of which assessee holds lease or other right of occupancy ". It is clear that this benefit has been extended to lessee or even licensee who is not owner by enacting sub-section (1A). Obviously, such exercise would have been unnecessary if limited owner is covered by sub-section (1) of section 32 of Act, it is continued to exist throughout (sic). This is further indication of legislative intent and can be relied on as aid to construction of sub-section (1) of section 32 of Act. Learned counsel for assessee tried to contend that sub-section (1A) is merely declaratory in character. We are unable to accept this contention. Sub- section (1A) is definite enacting provision and is obviously not intended to merely declare existing law contained in sub-section (1). mere declaration of existing law contained in sub-section (1) covering also lessee or licensee, etc., would have been easily made by inserting Explanation to sub- section (1) saying so. It is, therefore, clear that not only ordinary meaning of word " owned " used in sub-section (1) and context in which same has been used indicate that sub-section (1) applies only to absolute owner of property, but legislative history of these provisions also points in that direction. Tribunal was, therefore, justified in rejecting assessee's contention and refusing to give benefit of section 32(1) of Act. This question also has to be answered in favour of Revenue. Question No. 4 relates to alternative contention of assessee which is based on sections 30, 31 and 37 of Act. In section 30, reliance is placed on provision giving benefit to tenant and rent paid for such premises. Section 31 of Act obviously is inapplicable because it relates to amount spent on account of current repairs and any premium paid in respect of insurance, etc., which is not present case. Section 37 of Act is residuary provision relating to business expenses laid out or expended wholly and exclusively for purposes of business or profession. Tribunal has considered contention based on rent to which section 30 of Act applies and pointed out that this amount of which deduction is claimed by assessee, is in addition to rent payable for premises as expressly mentioned in agreement itself. argument now advanced on basis of section 37 of Act for allowing it as deduction on account of business expense does not appear to have been advanced earlier. That apart, necessary findings to indicate that it was expenditure laid out or expended wholly and exclusively for purposes of business, are not present. In reality, this is new case admitted to be set up for first time at this stage. Tribunal has considered this contention at length on basis of material produced by assessee and reached conclusion that it is capital expenditure. We do not find any reason to take contrary view. It may be mentioned that sub-section (1A) of section 32 of Act inserted subsequently for first time provides for such situation by giving benefit to assessee who holds lease or other right of occupancy and has incurred capital expenditure for purposes of business or profession of this kind. In our opinion, sub-section (1A) of section 32 of Act also supports conclusion reached by Tribunal that this expenditure incurred by assessee was in nature of capital expenditure for which provision has been made for first time only in sub-section (1A) of section 32 of Act which was not available at present to assessee during relevant assessment years. Tribunal was, therefore, justified in rejecting even this contention of assessee. Question No. 5 relates to assessee's claim for deduction of amount of interest which accrued to it as its income against loans advanced by assessee to M/s Golcha Properties (P) Ltd., Nepalganj, Nepal. contention of assessee is that this amount was given up by it on request of debtor after debit note had been issued to debtor at instance of debtor on account of financial exigencies which debtor was facing. Resolution dated June 22, 1965, passed by board of directors of assessee company was relied on for this purpose along with correspondence exchanged between assessee and debtor. Tribunal has held on construction of resolution dated June 22, 1965, that interest which had accrued to assessee was really not given up by this resolution and it only had effect of deferring recovery of that amount. Learned counsel for assessee challenges this conclusion and places reliance on decision of Bombay High Court in H. M. Kashiparekh & Co. Ltd. v. CIT [1960] 39 ITR 706. In our opinion, view taken by Tribunal is not open to interference. In first place, entire material on which assessee relied for this purpose comprising of correspondence between it and debtor and aforesaid agreement dated June 22, 1965, does not indicate that this amount had really been abandoned or given up by assessee and not merely deferred for recovery as held by Tribunal. That apart, there is not even suggestion to indicate that this facility to debtor, whether it was by deferring recovery or by abandonment, was extended on ground of commercial expediency so as to justify assessee's claim for deduction on that basis. Bombay decision relied on by learned counsel for assessee itself clearly indicates that unless amount was given up after it had accrued due for payment by assessee under ground of commercial expediency, assessee was not entitled to get benefit of such deduction. This further requirement essential for deduction claimed in present case was not even suggested by assessee and for this reason obviously there is no finding of existence thereof. This is another reason to sustain view taken by Tribunal on this point. This question also has, therefore, to be answered in favour of Revenue. Learned counsel for assessee relied upon decision of Supreme Court in R. B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570, wherein assessee whose property remains vested in Custodian of Evacuee Property by virtue of section 6(1) of Pakistan (Administration of Evacuee Property) Ordinance, 1949, as evacuee property, is not owner of property for purposes of section 9 of Indian Incometax Act, and it was held that assessee cannot exercise any rights in that property except with consent of Custodian he merely has some residual beneficial interest in that property that he had left in Pakistan, and further that equitable considerations are irrelevant in interpreting tax laws. Learned counsel wants to draw analogy from this judgment and submits that in instant case also, since Maratha Mandir has only residual beneficial right, it should not be considered to be owner and property should be considered to be owned by assessee. In owner and property should be considered to be owned by assessee. In our opinion, this judgment does not help petitioner at all. Their Lordships themselves have held in this judgment that property cannot be owned by two persons, each one having independent and exclusive right over it for purpose of income-tax, and owner must be that person who can exercise rights of owner not on behalf of owner but in his own right. In instant case, it is not in dispute that ownership has been transferred to assessee by Maratha Mandir Private Ltd. and in this view of matter, in our opinion, this decision instead of supporting case of assessee, lends support to contention of Revenue. Reliance was then placed on observations made in decision of Calcutta High Court in CIT v. Steelcrete (P.) Ltd. [1983] 142 ITR 45, wherein it has been held that expression " owner " has different meanings in different contexts and owner need not always have complete user of right of full ownership at all times. In that case, assessee, private limited company engaged in construction work, it secured contract and for doing job, imported some type of machinery which was actually imported by Government of India and payment was also made by Government of India. assessee was allowed to use machinery on condition that Government of India recovered total cost of machinery from assessee as owner of building during period of lease as he continues in possession even after expiry of lease. This case has no application to facts of present case, because in that case, assessee's brother had taken lease of vacant site for period of 20 years on monthly rent of I Rs. 20 for purposes of constructing building thereon. On expiry of 20 years, building was to become property of lessor and lessee was to have no manner of right over building or site. assessee's brother constructed theatre and sold his leasehold rights to third person from whom assessee purchased it in 1950 for sum of Rs. 1,50,000 out of which Rs. 1,00,000 was price of building. Reliance was also placed on case in Y. V. Srinivasamurthy v. CIT [1967] 64 ITR 292 (Mys). It was in these circumstances that it was held that assessee was " owner " of building during period of lease and was, therefore, entitled to claim depreciation, bat as he continued to be in possession even after expiry of lease, he cannot be deemed to have " sold or discarded or demolished or destroyed " building within meaning of section 10(2)(vii) of Income-tax Act. Consequently, on facts and circumstances of case, assessee was not entitled to deduction of RS. 85,907 claimed by him either under section 10(2)(vii) or under section 10(2)(xv) of Act, but he was entitled to deduct sum of Rs. 2,203 under section 10(2)(vi) of Act as allowance for depreciation. aforesaid judgment in no way supports case of assessee. Reliance was then placed on Addl. CIT v. Lawlys Enterprises (P.) Ltd. [1975] 100 ITR 369 (Pat). In this case, assessee constructed third floor on building and was running his hotel business. He was lessee of building. Under terms of lease, he had right to make additions and alterations to building and on expiry of lease he was to deliver back possession to lessor in its original condition. He claimed depreciation on floor added by him which was allowed holding that third floor was owned by him and was used for purpose of business under section 32 of Income-tax Act. In this case, position was different because assessee was obliged to remove additions before handing back possession of building at end of lease and during period of lease, he was owner of entire third floor. In those circumstances, court held that full ownership for period does not militate against concept of ownership in jurisprudence. However, in same judgment, court had added that it is not unknown that lessee 0f land may construct building at his own expense but at same time ownership in it, according to indenture of lease, may vest in lessor. Since time of construction, lessee merely may pay rent for it adjusting it towards amount spent on construction. In such case, lessee will not be owner of building even for limited period and these observations in fact apply to present case and as such, observations in this case support case of Revenue rather than assessee. Reliance was then placed on CIT v. Chandra Agro P. Ltd. [1979] 117 ITR 251 (All). This was case regarding certain expenditure made on improvement of building and in fact no law has been discussed in this case. Thus, it neither applies on facts nor on law to instant cage. Learned counsel thereafter cited Saiffuddin v. CIT [1985] 156 ITR 127 (Raj). This case has no bearing on facts of present case as, firstly, it arises from matter under section 22 of Income-tax Act and, secondly, that was case of joint ownership with brothers. Reliance was then placed on CIT v. Kanaiyalal Nimani [1979] 120 ITR 892 (Cal), which too is case under section 22 of Income-tax Act and was in respect of construction of certain stall. This has no application to facts of present case. Reliance was then placed on Addl. CIT V. U. P. State AgroIndustrial Corporation Ltd. [1981] 127 ITR 97 (All), where their Lordships of Allahabad High Court held that expression " building owned by assessee " in section 32 of Act has not been used in sense of property, complete title in which vests in assessee. But, in same judgment, their Lordships have held that assessee will be considered to be owner of building under section 32 of Act if he is in position to exercise rights of owner not on behalf of person in whom title vests but in his own right, which is not position in present case. There, assessee was put in possession of properties without any reservation with right to dispose of them as if it was owner, while in instant case, according to terms of agreement, assessee is only financier having right to use property for limited years. Thus, observations in this case help Revenue rather than assessee. Thus, none of cases cited by learned counsel for assessee is applicable to his advantage in instant case. For aforesaid reasons, these questions are answered against assessee and in favour of Revenue as under: Reference No. 16 of 1978. Tribunal was justified in holding that assessment order for assessment year 1965-66 was made within prescribed period of limitation in view of Explanation (1) to section 153 of Act. Tribunal was justified in holding that assessee is not industrial company. Tribunal was justified in holding that assessee is not owner of cinema styled as Maratha Mandir and machinery, plant, etc., installed in such building by assessee with its own finance and no depreciation and development rebate are available to it in respect thereto. Tribunal was justified in rejecting alternative contention of assessee that amount spent by assessee on construction of cinema theatre known as Maratha Mandir and in purchasing various movable assets installed therein out of its own funds was revenue expenditure. Tribunal was justified in holding that interest income of Rs. 1,15,684 which accrued and arose to assessee on loans given to M/s Golcha Properties (P.) Ltd. Nepalganj, Nepal, at resolution passed by assessee company on June 22, 1965, did not have effect of making such income non-existent in accounting period corresponding to assessment year 1965-66. *** GOLCHA PROPERTIES (P) LTD. v. COMMISSIONER OF INCOME TAX