Business-use test for depreciation: let-out building space is apportioned, while controlled plant may qualify for full business allowances.

A building used partly for the assessee's own business and partly let out must be apportioned for depreciation purposes, so only the business-use portion qualifies for proportionate depreciation. By contrast, lifts and air-conditioning plant retained in the assessee's exclusive control remained wholly business assets, because incidental use by tenants or visitors did not amount to separate non-business user. On that basis, full depreciation was treated as available for such plant and machinery, and development rebate was regarded as dependent on the machinery being wholly used for business. The commentary distinguishes immovable property from plant and machinery and emphasises actual business user and control as the governing test.

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Issues: (i) whether proportionate depreciation was allowable on the portion of the building let out to tenants and the business income of which was assessable under section 9 of the Indian Income-tax Act, 1922; (ii) whether full depreciation was allowable on the lifts and air-conditioning plant installed in the building though one floor was let out; and (iii) whether development rebate was allowable on the lifts and air-conditioning plant under section 10(2)(vib) of the Indian Income-tax Act, 1922.

Issue (i): whether proportionate depreciation was allowable on the portion of the building let out to tenants and the business income of which was assessable under section 9 of the Indian Income-tax Act, 1922.

Analysis: The building was used partly for the bank's own business and partly let out. Income from the let-out portion fell under section 9, while depreciation on business assets was governed by section 10(2)(vi). Since only the portion used for business could be brought into account for depreciation, the building had to be treated as divisible into business-use and non-business-use portions. The letting out of one floor was not commercial exploitation of the kind that would justify treating the whole building as a business asset for depreciation purposes.

Conclusion: Proportionate depreciation alone was allowable, and the claim for full depreciation on the entire building was rejected.

Issue (ii): whether full depreciation was allowable on the lifts and air-conditioning plant installed in the building though one floor was let out.

Analysis: The lifts and air-conditioning plant were machinery and plant, not property falling within section 9. The relevant question was whether they were used for the business of the assessee. They remained in the assessee's exclusive control and were not hired out or placed at the tenant's disposal by any separate arrangement. Mere use by tenants, customers, or visitors did not amount to a non-business user by another person. On that footing, the plant and lifts were wholly used for the business of the assessee.

Conclusion: Full depreciation was allowable on the lifts and air-conditioning plant.

Issue (iii): whether development rebate was allowable on the lifts and air-conditioning plant under section 10(2)(vib) of the Indian Income-tax Act, 1922.

Analysis: Development rebate required the machinery or plant to be wholly used for the purposes of the business. The lifts and air-conditioning plant were installed in the bank's head office, remained under its control, and were not separately let out or assigned for non-business use. The occasional benefit to tenants or visitors did not detract from the assessee's own wholesale business user of the machinery.

Conclusion: Development rebate was allowable on the lifts and air-conditioning plant.

Final Conclusion: The questions were answered partly in favour of the assessee and partly in favour of the revenue, with proportionate depreciation upheld for the building but full depreciation and development rebate allowed for the lifts and air-conditioning plant.

Ratio Decidendi: For depreciation, a building let out in part must be apportioned between business use and non-business use, but plant and machinery in the assessee's exclusive control are treated as wholly used for business where no separate user is transferred to another.

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