1967 (10) TMI 9 - HC - Income Tax

Court rules in favor of assessee's depreciation claim and charitable donation exemption under Income-tax Act

The court upheld the assessee's claim for depreciation on assets for the assessment year 1956-57, ruling that the assets were owned by the assessee and ... Claim of depreciation when the assets owned by one company and used by another company where other company using assets acting as sales manager - held that depreciation was allowable to the company who owned the machine Issues:1. Claim for depreciation on assets for the assessment year 1956-57.2. Claim for exemption under section 15B of the Income-tax Act for a donation made for charitable purposes.Analysis:1. The first issue pertains to a claim for depreciation on assets amounting to Rs. 53,634 for the assessment year 1956-57. The assets in question were originally owned by a subsidiary of the assessee and were later taken over by the assessee. The dispute arose regarding whether the assessee was entitled to claim depreciation on these assets, considering they were being used by the subsidiary for sales management. The Income-tax Officer initially disallowed the claim, stating that the subsidiary was a separate legal entity. However, the Appellate Assistant Commissioner and the Tribunal ruled in favor of the assessee, emphasizing that the assets belonged to the assessee and were being used for its business purposes. The Tribunal concluded that the subsidiary functioned as a department of the assessee, just a separate legal entity. The court upheld this decision, stating that the depreciation claim was valid under section 10(2)(vi) of the Income-tax Act, as the assets were owned by the assessee and used for its business operations.2. The second issue involves a claim for exemption under section 15B of the Income-tax Act for a donation of Rs. 6,600 made for charitable purposes. The donation was in the form of a kiln provided to the University of Bombay for research purposes. The Income-tax Officer initially rejected the claim, but the Appellate Assistant Commissioner and the Tribunal allowed the exemption, considering the donation as eligible for rebate under section 15B. The Tribunal highlighted that the donation, although in the form of a tangible asset, ultimately represented a sum of money that went out of the assessee's coffers for charitable purposes. The court agreed with this interpretation, emphasizing the substance of the transaction over its technical form. The court held that the donation of the kiln was essentially a donation of Rs. 6,600 to the University, making it eligible for relief under section 15B. Therefore, the court affirmed the decision of the Tribunal, ruling in favor of the assessee and directing the Commissioner to pay the costs.