1960 PLP 1008 (PTD)

In this case the assessee derived income from property, business, share income from firms, etc., during the accounting year, which was Diwali year 2008, corresponding to the period from the 9th November, 1950, to the 29th October, 1951. On the 22nd June, 1951, the assessee purchased a new car for a sum of Rs. 12,

000. The car was admittedly used only for four months during the accounting year. The Income‑tax Officer allowed an initial depreciation to the extent of Rs.

400. He took into account the fact that the car was used for four months in the year and so the proportionate allowance should be one‑third. The Income‑tax Officer also took into account the circumstances that the car was also used for pri vate purposes. The Income‑tax Officer therefore held that deduction should be half for business purposes since the other half was for personal use. According to the Income‑tax Officer the initial depreciation was 50 percent. of Rs. 2,400, and one‑sixth of this amount, namely, Rs. 400, was the proper amount of deduction to be allowed for initial depreciation. When the matter came up in appeal the Appellate Assistant Commissioner took the view that the assessee was entitled to a sum of Rs. 1,200 as the initial depreciation upon this car. The Appellate Assistant Commissioner held that the circum stance that the car was only used for four months in the accounting year was not relevant for the purpose of compu tation of initial depreciation. The Tribunal, however, fully allowed the deduction of Rs. 2,400 claimed by the assessee for the initial depreciation. The Tribunal was apparently of the view that in calculating the initial depreciation of the car the question of personal use was not a material consideration. At the instance of the Income‑tax Department the Appellate Tribunal has submitted the following question of law for the determination of the High Court: "Whether in the facts and circumstances of the case, the assessee was entitled to the entire claim of initial depreci ation on the use of the car in the assessment year 1952‑53?" On behalf of the Income‑tax Department Mr. R. J. Bahadur put forward the argument that the view taken by the Appellate Tribunal is erroneous in law because it has not taken into account the language of section 10 (3) of the Income‑tax Act and the bearing of that section on the calculation of initial depreciation claimed under section 10 (2) (vi) of the statute. It was submitted by the learned counsel that the view taken by the Appellate Assistant Commissioner in this case is the correct view and the initial depreciation to be allowed to the assessee was properly fixed by him at the sum of Rs. 1,

200. We think that the submission of learned standing counsel is well founded and must be accepted as correct. The question of initial depreciation is dealt with in section 10 (2) (vi) which reads as follows: "10. (2) Such profits or gains shall be computed after making the following allowances namely: (vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent, where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed ; and where the buildings have been newly erected, or the machinery or plant being new, not being machinery or plant entitled to the development rebate under clause (vib) has been installed, after the 31st day of March, 1945, a further sum (which shall however not be deductible in determining the written down' value for the purposes of this clause) in respect of the year of erection or installation equi valent. (a) in the case of buildings the errection of which is begun and completed between the 1st day of April, 1946, and the (31st day of March) 195r), (both dates inclusive), to fifteen percent. of the cost thereof to the assessee ; (b) in the case of other buildings, to ten percent. of the cost thereof to the assessee ; (c) in the case of machinery or plant, to twenty percent. of the cost thereof to the assessee; It is necessary in this context to reproduce section 10 (3) of the Act. "(3) Where any building, machinery, plant or furniture in respect of which any allowance is due under clause (iv) clause (v), clause (vi) or clause (vii) of subsection (2) is not wholly used for the purposes of the business, profession or vocation, the allowance shall be restricted to the fair proportional part of the amount which would be allowable if such building, machinery, plant or furniture was wholly so used." Taking the pLaln grammatical meaning of the language of section 10 (3) of the Act we are of opinion that the pro vision of initial depreciation to be given to the assessee under section 10 (2) (vi) is controlled by the language of section 10 (3) of the Act which expressly restricts the allowance to the fair proportional part of the amount which would be allowable if the machinery was wholly used for the purposes of the business, in the case where the machinery is not wholly used for the purposes of the business but is used both for the pur poses of the business and for private purposes. For these reasons, therefore, we hold that the view taken by the Appellate Tribunal in this case is erroneous in law and the assessee is entitled to a sum of Rs. 1,200 as initial depre ciation for the assessment year 1952‑53, and the view taken by the Appellate Assistant Commissioner is correct. We accordingly allow the application and answer the ques tion of law referred to the High Court in favour of the Income‑tax Department and against the assessee. The assessee must pay the costs of this reference. Hearing fee Rs.

250. Application allowed.