Lessee ownership of superstructure allows depreciation, but balancing allowance fails without sale, discard, demolition, or destruction.

A lessee who erects a theatre superstructure on leased land is treated as the owner of that structure during the lease period for depreciation purposes, even though the land remains with the lessor and title to the building may pass on expiry. Depreciation was therefore available under section 10(2)(vi) of the Indian Income-tax Act, 1922. Balancing allowance under section 10(2)(vii) was not available because the building was neither sold, discarded, demolished nor destroyed, and mere expiry of the lease while possession continued did not amount to a sale. The alternative claim as business expenditure under section 10(2)(xv) also failed because the amount was not wholly and exclusively laid out for business.

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Issues: (i) Whether the assessee was the owner of the theatre superstructure during the lease period so as to claim depreciation under section 10(2)(vi) of the Indian Income-tax Act, 1922; (ii) whether the written-off value of Rs. 85,907 was deductible as balancing allowance under section 10(2)(vii), or as business expenditure under section 10(2)(xv), on the footing that the building had been sold or discarded on expiry of the lease.

Issue (i): Whether the assessee was the owner of the theatre superstructure during the lease period so as to claim depreciation under section 10(2)(vi) of the Indian Income-tax Act, 1922

Analysis: The lease structure showed that the lessee had erected the theatre at his own cost and retained possession and enjoyment of the superstructure during the currency of the lease. A lessee who constructs a building on leased land is regarded as owner of that superstructure for the period of the lease, even though the land belongs to the lessor and the building may vest in the lessor on expiry of the term.

Conclusion: The assessee was the owner of the superstructure during the relevant accounting year and was entitled to depreciation under section 10(2)(vi).

Issue (ii): Whether the written-off value of Rs. 85,907 was deductible as balancing allowance under section 10(2)(vii), or as business expenditure under section 10(2)(xv), on the footing that the building had been sold or discarded on expiry of the lease

Analysis: Section 10(2)(vii) applies only where the building, machinery or plant has been sold, discarded, demolished or destroyed. The assessee continued in possession and use of the theatre, and the facts did not show abandonment or discarding of the building. The transaction also did not amount to a sale, because there was no handing over of the theatre for a price, and the statutory language could not be expanded to treat mere expiry of lease rights while possession continued as a sale. The claim under section 10(2)(xv) was not sustainable because the amount was not expenditure laid out wholly and exclusively for business.

Conclusion: The assessee was not entitled to deduction of Rs. 85,907 under either section 10(2)(vii) or section 10(2)(xv).

Final Conclusion: The assessee succeeded only to the extent of depreciation on the theatre superstructure, but failed on the claim for balancing allowance and alleged business deduction.

Ratio Decidendi: A lessee who erects a superstructure on leased land is the owner of that superstructure during the lease period for depreciation purposes, but balancing allowance under section 10(2)(vii) arises only on an actual sale, discard, demolition, or destruction, and mere continuance in possession after expiry of the lease does not satisfy that requirement.

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