Statutory restriction on depreciation claims for managing director accommodation must be applied, not overridden by general business use reasoning.

Depreciation claimed on company-owned assets placed in the managing director's residence and guest house had to be tested under section 10(4A) of the Indian Income-tax Act, 1922, because that provision restricted allowances for assets used by specified persons where the Income-tax Officer considered the claim excessive or unreasonable in light of business needs and benefit derived. The Tribunal erred by relying only on the general proposition that the accommodation was connected with business and by failing to apply the statutory limitation. The question was answered against the assessee and in favour of the Revenue.

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Issues: Whether depreciation on assets provided in the managing director's residence and guest house was allowable without considering section 10(4A) of the Indian Income-tax Act, 1922.

Analysis: The allowance claimed related to company-owned assets used by the managing director for personal accommodation and benefit. Section 10(4A) specifically restricted allowances in respect of assets used by specified persons where, in the opinion of the Income-tax Officer, the allowance was excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived therefrom. The Tribunal had proceeded on the general notion that the assets were used for the company's business because furnished accommodation was to be provided under service conditions, but it did not examine the statutory restriction contained in section 10(4A). The earlier findings of the income-tax authorities had proceeded on that provision and recorded the relevant factual basis.

Conclusion: The Tribunal was not right in ignoring section 10(4A) of the Indian Income-tax Act, 1922, and the question was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: Where a specific statutory prohibition or limitation governs allowability of an item, the Tribunal must apply that provision and cannot decide the issue on general notions of business use alone.

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