Depreciation allowance is not time-apportioned where business use is full during the period of use, clarifying computation rules.

Depreciation under Section 10(2)(vi) of the Income-tax Act, 1922 is not reduced merely because plant and machinery was used for only part of the previous year, so long as the asset was wholly used for the assessee's business during the period of use. Section 10(3) was treated as applying only where the asset was not wholly used for business purposes, and not as a basis for apportioning depreciation by time. Section 26(2) was described as governing liability and succession in business, not the computation of depreciation allowance.

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Issues: Whether depreciation under Section 10(2)(vi) of the Income-tax Act, 1922 is to be restricted to a proportionate amount when the plant and machinery was used for business only for part of the previous year.

Analysis: The allowance under Section 10(2)(vi) was held not to depend on a time factor. Section 10(3) was confined to cases where the asset was not wholly used for the purposes of the business, profession or vocation, and did not apply where the machinery was used wholly for the assessee's business, though only for part of the year. Section 26(2) was treated as governing liability and succession of business, not the computation of depreciation allowance. The reference to the prior Privy Council decision did not assist the Revenue because the question now raised had not been decided there.

Conclusion: The assessee was entitled to the full depreciation allowance for the year, and the question was answered in the affirmative in favour of the assessee.

Ratio Decidendi: Depreciation under Section 10(2)(vi) is not apportioned merely because the asset was used for only part of the year, so long as it was wholly used for the assessee's business during the period of use; Section 10(3) applies only to partial use for non-business purposes, and Section 26(2) does not control computation of the allowance.

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