COMMISSIONER OF INCOME TAX Vs. O P MONGA

JUDGEMENT

(1.) THIS reference under S. 256(1) of the IT Act, 1961, raises a question at the instance of the Revenue. It reads thus :

(2.) THE assessee did not claim depreciation on the shed standing on the plot of land demised by the said deed for the previous year in question. He appealed against the assessment order made by the ITO to the AAC. He claimed in the appeal depreciation on the said shed for the first time and was permitted to do so. He contended that the MIDC had sold to him the said shed under the said deed. The AAC found that the assessee was not the owner of the said shed and disallowed the assessee's claim for depreciation thereon.

(3.) THE said deed recites that the MIDC had set up an industrial estate at Bhosari and had constructed sheds and other structures on several plots of land comprised therein and that the MIDC had agreed to grant to the assessee the lease of plot No. C 4(RS) 22 in the industrial estate together with all sheds and structures standing thereon. The said deed provided for the following : In consideration of the sum of Rs. 15,000 paid by the assessee to the MIDC and the further sum of Rs. 57,213 agreed to be paid by the assessee to the MIDC in the manner set out in the schedule to the said deed as and by way of premium and of the rent thereby reserved and the covenants and agreements on the part of the assessee, the assessee was granted the said plot of land together with all rights, easements and appurtenances thereto for the term of ten years, paying therefor the yearly rent of Re. 1. The assessee covenanted, inter alia, that no alterations or additions would, at any time, be made to the facade or elevations of any building erected and standing on the said plot of land without the previous approval of the MIDC; to keep in good and substantial repair and condition those buildings and premises throughout the term of the lease; to permit the MIDC to enter into and upon the "demised premises" to inspect the state of repair thereof; to keep the building already erected or which might thereafter be erected on the said plot of land insured in the joint names of the MIDC and the assessee; and, at the expiration or sooner determination of the term of the lease, to deliver unto the MIDC the "demised premises" and/or erections and buildings then standing or being thereon. The MIDC was permitted to re enter upon the "demised premises" if the rent or any instalment of premium was in arrears, in which case no compensation would be payable to the assessee on account of "the building or improvements built or made". The MIDC covenanted with the assessee that upon the assessee paying the rent thereby reserved and observing and performing the covenants on the assessee's part, the assessee would peacefully enjoy the "demised premises" for the term of the lease. If the assessee, having duly paid the entire amount of premium and the rent and having observed all covenants and conditions, was desirous of receiving a new lease of the "demised premises" and gave notice to the MIDC of such desire six months before the expiration of the term, the MIDC would grant to the assessee a new lease of the "demised premises" for a further term of fifty years at the same rent and upon the same covenants and conditions.