Initial depreciation on factory buildings requires actual business use; preparatory pre-production work is not enough.

Initial depreciation on a newly erected factory building under section 10(2)(vi) is available only when the building is used for the purposes of a business actually carried on in the relevant year. Preparatory or pre-production activities, by themselves, do not amount to carrying on the manufacturing business or to qualifying use of the building for that business. A separate selling activity does not, without more, link the factory building to the business for which depreciation is claimed. On that reasoning, the assessee was not entitled to the allowance for the accounting year.

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Issues: Whether the assessee was entitled to initial depreciation allowance on the factory building under section 10(2)(vi) when the building was completed in the accounting year but the manufacturing business had not commenced, and only pre-production activities were carried on.

Analysis: The allowance of initial depreciation under section 10(2)(vi) was held to be part of the scheme of section 10, which permits depreciation only in relation to buildings used for the purposes of a business actually carried on in the relevant year. The building in question was erected during the year, but the activities undertaken before production began were only preparatory and did not amount to carrying on the manufacturing business or to use of the building for the purposes of that business. The fact that the assessee carried on a separate selling activity did not connect the factory building with the business actually carried on during the year.

Conclusion: The assessee was not entitled to initial depreciation allowance for the accounting year, and the question was answered in the negative.

Ratio Decidendi: Initial depreciation under section 10(2)(vi) is allowable only when the newly erected building is used for the purposes of a business actually carried on in the relevant year, and preparatory or pre-production operations do not satisfy that requirement.

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