Depreciation on leased industrial assets allowed where letting of a working mill was treated as business use.

Depreciation under section 10(2)(vi) of the Indian Income-tax Act, 1922 was treated as allowable where a company owned a mill, machinery and plant but leased them out as a working concern instead of operating the unit itself. The leasing arrangement required the lessees to run the mill and do ordinary repairs, while the lessors bore loss from depreciation and wear and tear. The court reasoned that the assessee's business was letting the mill for working, and the rent included compensation for depreciation, so the property was used for the purposes of the assessee's business. Depreciation deduction was therefore admissible on the leased buildings, machinery and plant.

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Issues: Whether depreciation under section 10(2)(vi) of the Indian Income-tax Act, 1922 was allowable to an assessee-company that had leased out its buildings, machinery and plant instead of operating the mill itself.

Analysis: The company owned the mill, machinery and plant and had leased the unit as a working concern under an arrangement under which the lessees worked the mill and carried out the ordinary repairs, while the lessors bore the loss caused by depreciation and wear and tear. The business carried on by the assessee was therefore the business of letting the mill for working, and the rent received included an element intended to compensate for depreciation. The property was accordingly used for the purpose of the assessee's business, and the statutory requirement for depreciation allowance was satisfied.

Conclusion: The assessee was entitled to deduction for depreciation on the leased buildings, machinery and plant.

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