Decided on March 15,1935



This is a reference under Sec. 66(2) of the Income Tax Act by the Commissioner of Income-tax, Central and United Provinces. The facts are not in dispute, and the only question for determination before us is whether the assessee, Rao Bahadur Bhikaji Venkatesh, was entitled to any allowance in respect of depreciation of buildings, machinery, plant or furniture under Sec. 10(2)(vi) of the Act for the year in respect of which the assessment was made. - (1.) RAO Bahadur Bhikaji Venkatesh owns a ginning factory at Yeotmal and has jointed a pool of several owners of such factories. According to the working arrangement of the pool all the factories do not work in the same year, but some work and some remain idle in rotation. During the year, for which the assessment was made, admittedly the assessees factory did not work, though he received his share of pro fits out of the pool. The assessees contention is that, even though the machinery did not work, the factory and machinery were still used for the purpose of the business with in the meaning of Section 10( 2)(iv). Thus contention has been negatived by the income tax authorities, and the view put forward by the Commissioner in the reference is that the buildings, plant or machinery must be actually used for purposed of the business during the year, or else no allowance can be made for depreciation. This is the view that has been taken in Radha Kishen & Sons v. Commissioner of Income Tax. Punjab. The learned Counsel for the assessee contended that the words "used for the purpose of the business", occurring in Section 10(2)(iv), were general and only meant "such as were generally used or might be used for purposes of the business" and not "actually used during any particular year." We cannot, however, accept that contention. Apart from the plain meaning of the word "used" which must be taken to mean "actually used", and not "capable of being used" or "generally used", we would agree with the commentary in Sundarams Law of Income-tax in India, page 516 of the third edition, that Section 3 governs the whole Act, and that in Section 10, where an allowance has to be made covering a longer period than one year, the definite proviso is inserted to meet the case. As already stated above, it is admitted that the assessees factory and machinery were not actually used for the purposes of the business during the year. The case, therefore, in Sri Gopalji & Co. v. Commissioner of Income Tax, Punjab, appears to us to be in point. There, as in the present case, the machinery, plant and buildings belonging to the Sri Gopalji Company were not actually used in the business which was carried on by the company during the year, but were used for the purposes of other business, and it was held that the company could not claim any allowance on account of depreciation. The case in Sadhucharan Roy v. Commissioner of Income Tax, Bengal, does not appear to us to be in point, because there the question was of a lease, and it was held that the owners, and not the lessee could claim depreciation under Section 10(2)(iv) : but the buildings, plant and machinery were, as a matter of fact, actually used. Even the argument derived from clause (iv) of Sec. 10(2), that in that clause "used for the purposes of the business", does not mean "actually used" but only "generally used", seems to us to have little, if any, force; because that clause deals with insurance against risk of damage or destruction, and there Can be no doubt that such insurance would be very materially affected by the questions whether the buildings, machinery, plant, etc., were actually used during the year or were lying idle; in other words, if they were lying idle, insurance would presumably be effected at a very much lower rate. We do not think, than, that any safe deduction Can be made from clause (iv) of Section 10(2) with regard to clause (vi) of that Section. We must hold, as indicated above, that in the latter clause, though the words "such buildings, machinery, plant, or furniture" would mean "buildings, machinery, plant or furniture used for the purposes of the business," "used" or "capable of being used". Nor Can we give any weight to an argument put forward by the learned Counsel for the assessee that actually there was more depreciation in the case of machinery that was not used than when it was under use. Whether this is a fact or not, we do not know, but in any case we hold it to be irrelevant and the case must be governed by the Act and not by any such general considerations. We therefore hold on the reference that with regard to clause (vi) of Section 10(2) of the Act the words "used for the purposes of the business," occurring in clause (iv) of that section, mean "actually used" and that in a case such as the present, where the buildings, plant and machinery were not actually used during the year no allowance Can be granted on account of depreciation. Under Section 66(5)of the Act we deliver judgment accordingly and send a copy to the Commissioner under the seal of the Court. Costs of the reference shall be paid by the assessee. We fix pleaders fee at Rs. 50. Reference answered accordingly.;

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