Depreciation allowance remains available when leased business assets are let for rent and wear and tear is borne by the lessor.

Depreciation allowance under Section 10(2)(vi) of the Indian Income-tax Act, 1922 was held admissible where the assessee leased out its plant, machinery and buildings and carried on the business of letting them for rent. The property remained the assessee's business asset, and the lease rent included an element compensating for wear and tear. The leasing arrangement itself constituted business use of the buildings, machinery and plant, so the fact that the lessees operated the mill did not defeat the lessor's statutory claim. The allowance was therefore allowed in favour of the assessee.

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Issues: Whether depreciation allowance under Section 10(2)(vi) of the Indian Income-tax Act, 1922 is admissible where the assessee has leased out its plant, machinery and buildings and carries on the business of letting them for rent.

Analysis: The property belonged to the assessee and was part of a business arrangement under which the mill was leased out as a working concern for rent. The rent included an element meant to compensate for wear and tear, and the leasing activity itself constituted a business use of the buildings, machinery and plant. The fact that the lessees actually worked the mill did not deprive the assessee of the statutory allowance, because the depreciation arose from the authorised use under the lease and was borne by the lessor under the terms of the arrangement.

Conclusion: The depreciation allowance was admissible, and the question was answered in favour of the assessee.

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