1935 (1) TMI 21 - HC - Income Tax

Assessee entitled to depreciation for leased property used in business. Court distinguishes income source under tax law.

In Re : Sadhucharan Roy Chowdhry

In Re : Sadhucharan Roy Chowdhry - [1935] 3 ITR . 114 Issues:1. Assessment of income from a jute press under Section 12 as income from 'other sources' versus Section 10 as profits or gains of business.2. Entitlement to allowance for depreciation under Section 10 (2) (vi) for buildings, plant, and machinery leased out.Analysis:1. The case involved the assessment of the assessee's income from a jute press under Section 12 as income from 'other sources' versus Section 10 as profits or gains of business. The assessee had purchased the jute press and subsequently leased it out to a private company. The Commissioner decided against the assessee's contention and referred the question of entitlement to an allowance for depreciation under Section 10 (2) (vi) to the Court.2. The main issue was whether the assessee was entitled to an allowance for depreciation in respect of the buildings, plant, and machinery leased to the Jute Pressing Company under Section 10 (2) (vi) of the Act. The Commissioner's decision was based on the requirement that depreciation is allowable only when the machinery and plant are the property of the assessee and used for the business being taxed. The Court disagreed with the Commissioner's reasoning, emphasizing that the press was the property of the assessee and used for the business of letting out the press, making the original intention to work the press irrelevant.3. The Court referenced the case of Mangalagiri Sri Umamaheswara Gin and Rice Factory Limited v. CIT to support the assessee's contention. The Court highlighted that the lessor in that case was a registered company, which was deemed irrelevant. The case established that a company leasing out buildings, plant, and machinery for a fixed annual rent was entitled to an allowance for depreciation under Section 10 (2) (vi) of the Income Tax Act.4. Additionally, the Court cited the case of Sutherland v. The Commissioners of Inland Revenue, where it was stated that letting a ship to freight is considered a trade, similar to letting out other machines or machinery for hire. The Court emphasized that the letting of a jute press at a rent is a business activity akin to letting a ship to freight, justifying the entitlement to depreciation allowance under Section 10 (2) (vi).5. The Court distinguished cases involving property letting under Section 9 from the present case, clarifying that income from letting out a jute press falls under either Section 12 or Section 10, not Section 9. The Court concluded that the lessees were liable only for repairs, not depreciation, as the buildings, machinery, etc., must be the property of the assessee for depreciation allowance under Section 10 (2) (vi).6. Ultimately, the Court answered the question in the affirmative, ruling that the assessee was entitled to an allowance for depreciation under Section 10 (2) (vi) for the buildings, plant, and machinery leased out. The assessee was awarded costs of the reference, and the concurring opinion of Jack, J., supported the decision.