2001 PLP 498 (PTD)

(d) Income‑tax‑‑‑ ‑‑‑‑Depreciation‑‑‑Flat used for business purpose‑‑‑Flat standing in name of director and not assessee‑Company‑‑‑Facts not properly enquired into‑‑ Matter remanded‑‑‑Depreciation not to be allowed if assessee fails to prove ownership of flat‑‑‑Indian Income Tax Act, 1961, S.32. Matter remanded for further enquiries with a direction that if the assessee failed to prove ownership then it was not entitled to depreciation allowance. By this reference application the following three questions are referred for our opinion: "(1) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the order of the Commissioner of Income‑tax (Appeals) that the income derived from storage charge from the leasehold land at 153A, Acharya Prafulla Chandra Road, Calcutta, would be assessable under 'the head 'Business? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the order of the Commissioner of Income‑tax (Appeals) that interest received on loan to Kedamath Mohanlal would be assessable under the head 'Business'? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the finding of the Commissioner of Income‑tax (Appeals) that the depreciation on the flat 'Rajhans' and the maintenance expenditure for the name would be deductible as business expenditure?" The assessee has constructed a factory shed and started an oil mill. As he suffered heavy losses, he closed the oil mill and even sold the machinery installed for the business. Thereafter, the assessee‑company let out the open space and godown to different parties and earned rental income. The claim of the assessee was disallowed only on the ground that the assessee is the owner of the superstructure on the leasehold land and not the owner of the plot of land. It is immaterial whether the assessee is owner of a plot of land or not but admittedly he is the owner of the superstructures on the land which were constructed by the assessee and were let out to different parties for a limited period for the year under consideration and even in the earlier years and in those years rental income from those structures was treated as income of the assessee from business. Therefore, whether the plot of land was registered or owned by the assessee is immaterial to ascertain whether the rental income is from the business or not. Accordingly, we answer the first question in the affirmative, that is, in favour of the assessee and against the Revenue. The next question raised in this reference is whether the interest received on loan to Kedar Nath Mohanlal should be assessed as business income. Before the Assessing Officer the assessee has claimed that the assessee has received the interest of Rs.19,500 from Kedar Nath Mohanlal on the amount which he has advanced to the aforesaid firm in the earlier years. The Income‑tax Officer treated this interest income as income from other sources. Learned counsel for the assessee argued that the assessee has advanced loan to various persons/parties, therefore, the Tribunal has treated this interest as income from the business. No names of the parties have been given but only on the claim of the assessee, the Tribunal has accepted the fact that the assessee has advanced loan to various parties. But if we read carefully again the assessment order itself, the facts are very clear that the assessee has claimed interest of Rs.19,500 receivable from Kedar Nath Mohanlal. Nowhere has the assessee claimed before the Assessing Officer that the interest of Rs.19,500 is receivable from various parties. Thus, the finding of the Tribunal is perverse and when the amount is advanced only to one party in the earlier years, the sole instance of advance of money cannot be treated as the assessee is having money‑lending business. Learned counsel for the assessee also submits that if the assessee has advanced' money from the business fund, then interest should be treated as income from the business. There is no such finding by any of the authorities that advance to Kedar Nath Mohanlal is from the business fund. In the absence of that finding it cannot be held that the interest income receivable from Kedar Nath Mohanlal be treated as income from business. Accordingly, we answer the second question in the negative, that is, in favour of the Revenue and against the assessee. The Commissioner of Income‑tax (Appeals) also found that the issue regarding the use of 'the flat for the business purpose was considered in the assessment year 1980‑81 and it was found that the flat was used for business purpose in that year. Therefore, they allowed the maintenance allowance as well as depreciation allowance. If the flat is used for the purpose of business then there is no difficulty in allowing the maintenance allowance but so far as the depreciation is concerned, the depreciation cannot be allowed unless it is owned by the assessee. Admittedly, there is a dispute whether the flat is owned by the assessee. The flat admittedly stands in the name of a director and not in the name of the assessee. Learned counsel for the assessee submits that the registration of the flat in the name of the assessee is not necessary. We agree with learned counsel for the assessee that for allowing the depreciation the registration of the flat is not necessary but at the same time the assessee has to prove that he owned that flat and no categorical finding is there to this effect. Therefore, we do not agree with the authorities below to allow the depreciation to the assessee on this flat which admittedly stands in the name of the director. The facts are not properly enquired into at any stage by the authorities below. Therefore, we answer question No.3 so far as the maintenance allowance is concerned in the affirmative, that is, in favour of the assessee and against the Revenue, but so far as the dispute relating to depreciation allowance is concerned, we set aside the order of the Tribunal and send the matter back to the Assessing Officer to make further enquiries to find out whether the flat is owned by the assessee. If the assessee fails to prove it, the assessee is not entitled for depreciation allowance. The reference application is disposed of with the above observations. All parties to act on a xeroxed signed copy of this dictated order upon usual undertaking. M.B.A./201/FC Order accordingly.