Initial depreciation must be restricted proportionately when a car is used partly for business and partly for private purposes.

Initial depreciation on a business asset is subject to proportionate restriction where the asset is not wholly used for business purposes. Because the car was used partly for business and partly for private use, the full allowance was unavailable and had to be limited to the fair proportion otherwise allowable under the controlling provision. The depreciation claim was therefore restricted, and the assessee could not recover the entire amount claimed.

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Issues: Whether the assessee was entitled to the entire claim of initial depreciation on the car, or whether the allowance had to be restricted where the car was used partly for business and partly for private purposes.

Analysis: Initial depreciation under section 10(2)(vi) is subject to section 10(3), which restricts the allowance to the fair proportional part of the amount otherwise allowable when the asset is not wholly used for business. Since the car was used only partly for business and partly for personal purposes, the full allowance could not be granted.

Conclusion: The assessee was not entitled to the entire claim of initial depreciation; the allowance was correctly restricted to Rs. 1,200, and the reference was answered in favour of the Income-tax Department.

Ratio Decidendi: Where an asset qualifying for initial depreciation is not wholly used for the purposes of the business, the depreciation allowance must be restricted proportionately under the controlling provision governing partial business use.

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