1946 (1) TMI 8 - HC - Income Tax

High Court affirms Tribunal decision on full depreciation allowance under Income-tax Act

The High Court affirmed the Tribunal's decision, ruling in favor of the company regarding the interpretation of Section 10(2)(vi) of the Income-tax Act. ... - Issues:Interpretation of Section 10(2)(vi) of the Income-tax Act regarding depreciation allowance for machinery used for a partial period in a year.Analysis:The case involved a limited liability company engaged in electrical stores, electricity distribution, and an oil mill business for part of the year. The company sought a full depreciation allowance for the oil mill machinery used for only two months and seven days in the year. The Income-tax Officer and the Appellate Assistant Commissioner allowed only a proportionate allowance, but the Income-tax Appellate Tribunal ruled in favor of the company, stating that the company was entitled to the full allowance as if the machinery had been used throughout the year.The key question referred to the High Court was whether the company could claim a depreciation allowance for the entire year despite using the machinery for a partial period. The Commissioner argued that sub-sections (3) of Section 10 and (2) of Section 26 necessitated a proportionate allowance based on the time factor. However, the Court found no support for this argument in the mentioned sub-sections. Sub-section (3) of Section 10 only applies when machinery is used partly for business, not wholly, as in this case. Section 26(2) deals with succession in business and is not relevant to computing tax liability under Section 10.The Court distinguished a previous case cited by the Commissioner, emphasizing that the judgment did not support the current argument. The Court upheld the Tribunal's decision, stating that the company was rightly entitled to the full depreciation allowance under Section 10(2)(vi). This interpretation would not disadvantage the Income-tax authorities, as the depreciation allowance is limited to the machinery's cost. The Commissioner was ordered to pay the assessee's costs.In conclusion, the High Court affirmed the Tribunal's decision, ruling in favor of the company and answering the referred question in the affirmative. The judgment clarified the application of Section 10(2)(vi) in cases of partial machinery use during a year, ensuring the correct computation of depreciation allowances.