March 2009
I. By holding shares, assessee entitled to exercise rights of owner of flat — Whether entitled to depreciation — Held, Yes. II. Forfeiture of application money on non-payment of call money on issue of debentures —Held, Capital receipt
By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Chartered Accountants
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45 (2008) 304 ITR (AT) 167 (Mumbai)
Deepak Fertilizers and Petrochemicals Corporation Ltd.
v. DCIT
A.Ys. : 1997-98 to 2001-2002. Dated : 21-9-2007
I. By virtue of holding the shares, assessee entitled
to exercise the rights of owner in respect of a flat — Whether entitled to
depreciation on flats — Held, Yes.
S. 32 — The assessee purchased the shares of YIL on the
basis of which it got an exclusive right to use and occupy certain flats and
claimed depreciation on the same which was disallowed by the Assessing
Officer, but the same was allowed by the CIT(A) relying on the provisions of
S. 2(47)(vi), S. 27(iii), S. 269UA(d)(ii) and also relevant Supreme Court
judgments.
The Tribunal observed as under :
1. The articles of association of a company engaged in
the business of real estate may provide that a shareholder of particular
shares would be entitled to exercise the rights of owner in respect of
properties owned by the company. Such mode of transfer is duly recognised by
the Legislature in provisions of S. 2(47)(vi), S. 27(iii), and S.
269UA(d)(ii)
2. The meaning of the term ‘owner’ for the purpose of S.
32 although not defined in the Income-tax Act, a reference to Supreme
Court’s decision in various cases can be construed so as to include a person
who can exercise the rights of the owner not on behalf of the owner but in
his own right. The term ‘owned’ as occurring in S. 32(1) should be assigned
a wider meaning. The provisions of this Section are for the benefit of the
assessee and the intention of the Legislature should be interpreted
accordingly.
The Tribunal accordingly allowed the assessee’s claim :
Cases relied upon :
(a) CIT v. Podar Cement P. Ltd., (1997) 226 ITR
625 (SC)
(b) Mysore Minerals Ltd. v. CIT, (1999) 239 ITR
775 (SC)
(c) R. B. Jodha Mal Kuthiala (1971) 82 ITR 570 (SC)
II. Forfeiture of application money on non-payment of
call money on issue of debentures —Held, Capital receipt.
The assessee issued partly convertible debentures and
received application money. On non-payment of call money, certain amount was
forfeited by the assessee. The assessee claimed it to be capital receipt not
liable to tax, which was rejected by the Assessing Officer. The CIT(A) deleted
the addition made by the Assessing Officer.
On Revenue’s appeal, the ITAT held that :
1. The decision of the Supreme Court in the case of T. V.
Sundaram Iyengar & Sons Ltd., 222 ITR 344 relied upon by the assessee, is
not relevant because the amount received is not a trading receipt of the
assessee.
2. Since the amount received was in respect of debentures
issued, it is a capital receipt not chargeable to rax.
Cases relied upon :
(1) CIT v. Mahindra & Mahindra Ltd., (2003) 261
ITR 501 (Bom.)
(2) Prism Cement v. Joint CIT, (2006) 285 ITR (AT)
43 (Mumbai)
