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Issues: (i) Whether the assessee-company, as successor to a business taken over as a going concern, was entitled to additional depreciation under section 10(2)(via) of the Income-tax Act, 1922 for the assessment years 1957-58 and 1958-59 in respect of machinery originally installed by the predecessor; and (ii) whether the assessee-company was entitled to development rebate under section 10(2)(vib) of the Income-tax Act, 1922 for the assessment year 1957-58 in respect of the same machinery.
Issue (i): Whether the assessee-company, as successor to a business taken over as a going concern, was entitled to additional depreciation under section 10(2)(via) of the Income-tax Act, 1922 for the assessment years 1957-58 and 1958-59 in respect of machinery originally installed by the predecessor.
Analysis: The allowance under section 10(2)(via) was held to attach to the machinery and the business, not merely to the original installer. The machinery was new when first installed and continued to remain within the statutory period for additional depreciation. The successor who took over the business as a going concern was entitled to claim the balance of the allowance available in the hands of the predecessor, and the concept of depreciation did not require the claimant to be the person who originally installed the machinery.
Conclusion: The issue was answered in favour of the assessee.
Issue (ii): Whether the assessee-company was entitled to development rebate under section 10(2)(vib) of the Income-tax Act, 1922 for the assessment year 1957-58 in respect of the same machinery.
Analysis: The relevant conditions were that the machinery had to be new, installed after the statutory cut-off date, wholly used for the business carried on by the assessee, and the rebate had to be computed with reference to the actual cost to the assessee. The provision did not expressly or by necessary implication confine the rebate to the person who physically installed the machinery. Since the business was taken over as a going concern and the machinery satisfied the statutory conditions, the successor was not disqualified from claiming the rebate.
Conclusion: The issue was answered in favour of the assessee.
Final Conclusion: The assessee-company was entitled to both the additional depreciation claims for the two assessment years and the development rebate claim for the relevant year, so the reference was resolved in its favour.
Ratio Decidendi: A successor who takes over a business as a going concern may claim depreciation-related incentives attached to new machinery, provided the statutory conditions are otherwise satisfied and the provision does not expressly require installation by the claimant itself.
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