Patna High Court
Commissioner Of Income-Tax, Bihar And ... vs S.K. Sahana & Sons. on 12 December, 1945
Equivalent citations: [1946]14ITR106(PATNA)
JUDGMENT
MANOHAR LALL, J. - This is a reference at the instance of the Commissioner of Income-tax, Bihar and Orissa, by the Appellate Income-tax Tribunal asking for the opinion of the Court on the question : "Is the assessee entitled to the full amount of depreciation under section 10(2)(vi) of the Income-tax Act irrespective of the period of user ?"
The facts are not in dispute. The assessee is a Hindu undivided family and had a business in mica and rice mill. The assessee keeps his account according to the Bengali year from April to April. In the assessment for the year 1940-41, the assessee claimed depreciation for machinery and building for the entire period of twelve months instead of eight and a half months even though on the first January, 1940, the assessee had transferred all his business in mica and rice mill along with the machinery and building to a joint stock company. The department allowed depreciation only for 8 1/2 months upon their view that the assessee ceased to be the owner of the mill and building on the 1st of January, 1940, and, therefore, could not claim depreciation for the entire twelve months. The Appellate Tribunal however, held that the Indian Income-tax Act did not authorise any apportionment of the depreciation allowance in regard to time. Hence the reference at the instance of the Commissioner.
The relevant provisions of the Act are contained in Section 10(2)(vi) which entitles the assessee to claim depreciation of the buildings, machinery, plant or furniture used by him for the purpose of business, profession or vocation. It is not disputed that the assessee was the owner of the building, machinery etc., during the accounting year. I do not see any provision in the Act which authorises an apportionment of depreciation on the assessee having sold the machinery or plant during the accounting period. The legislature was aware that a machinery or plant might be sold or discarded during the accounting year and in such events it is provided by Section 10(2)(vii) that the amount by which the written down value of the machinery or plant exceeds the amount for which the machinery or plant is actually sold or its scrap value is a deductible allowance and also that where the amount for which the machinery or plant is sold exceeds the written down value, the excess is to be deemed to be the profits of the previous year in which the sale took place.
Learned Advocate for the assessee also drew attention to Section 10(3) which provides that where a building or machinery for which allowance is due is not wholly used for the purpose of business, profession or vocation, the allowance is restricted to a fair proportional part of the amount which would be allowable if such building or machinery was wholly so used. He argues, that the legislature has directed an apportionment only in such a case and that there is no justification for extending the rule of apportionment to other cases. The contention, in my opinion, is sound. Our attention was drawn to a recent case decided by this Bench on the 15th August, 1945 -Commissioner of Income-tax, Bihar and Orissa v. Dalmia Cement Co. Ltd. In that case my Lord the Chief Justice, who delivered the judgment of the Bench, negatived the contention raised on behalf of the Income-tax department as to the meaning sought to be given to Section 10(3) and observed : "The words not wholly used for the purposes of the business, profession etc., do not mean not used throughout the year or during the whole of the year in question. They mean that the building, machinery etc., have not been used exclusively for other purpose of the profession or vocation, that is to say, they have been used for other purposes also. There is no such provision in the Act as would justify the view that if the machinery is not used throughout the year, then the period for which it has worked should be calculated and depreciation should be allowed in proportion to such period." The argument advanced on this occasion before us on behalf of the department is similar. I am of opinion that there is no such provision in the Act as would justify the view that if the machinery is not the property of the assessee throughout the year then the period for which it was the property of the assessee should be calculated and depreciation should be allowed in proportion to such period. It is not denied that the assessee as the owner of the machinery and building was using it during the accounting period for the purpose of business and he is being assessed on the profits which he made for the period during which he was the owner. It was contended by the learned standing counsel that the acceptance of this view is most inequitable as it would enable both the transferor and the transferee to claim full deduction for the depreciation although the machinery etc., have been used by either of them only for a broken period in the same year. But it has been rightly pointed out that equity and taxation are as poles asunder and the Court cannot invoke an equitable rule in the construction of a taxing statute.
For these reasons, in my view, the Appellate Tribunal has come to a correct conclusion, and I would answer the question in the affirmative.
The assessee is entitled to the costs of this Court; hearing fee Rs. 250.
FAZL ALI, C.J. - I agree.
Reference answered in the affirmative.