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Issues: Whether the assessee was entitled to claim the loss arising on sale of the property as an allowance under section 10(2)(vii) of the Income-tax Act, 1922.
Analysis: The property was purchased to provide residential accommodation to employees in the special circumstances following partition and was used to house employees so that the business could be carried on more efficiently. The earlier assessment treatment of the income from the property was not ative. The controlling test was whether the asset was used for the purposes of the assessee's business, and the provision of residential accommodation to employees in aid of business efficiency was treated as occupation or use for business purposes. On that footing, the building remained a business asset and the loss on sale was computable under section 10(2)(vii).
Conclusion: The assessee was entitled to claim the loss of Rs. 67,969 as an allowance under section 10(2)(vii) of the Income-tax Act, 1922, and the answer was in the affirmative in favour of the assessee.
Ratio Decidendi: A property acquired and used to house employees for commercial expediency, where such accommodation is incidental to and in furtherance of the business, is used for the purposes of the business within the meaning of the relevant allowance provision.
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