Decided on December 16,1935



This is a reference under Sec. 66 of the Income tax Act. The non-applicant assessee is the Central Provinces Manganese Ore Company Ltd., Nagpur, through its agent and General Manager Mr. Bartlett, and he objects to the disallowance of a sum of Rs. 9,800 as depreciation of the part of the Companys machinery which remained idle during the account year in question. Owing to depressed trade, part of the works was closed down after 1931, and the accumulated stock was sold in subsequent years. The Companys contention is that as the income during the account year was obtained out of the sale of the ore which had been won through the use of the machinery working in the previous year, therefore depreciation should be allowed for that machinery even in the year in which it was not being used. - (1.)
(2.) The question referred for decision are as follows : "Whether the words used for the purposes of the Business in Sec. 10(2)(iv) of the Indian Income Tax Act, 1922, mean used for such purpose during the account year or as claimed by your petitioners that the machinery must not have been used for other purposes. "(2) Whether in view of your petitioners business being the sale as well as the mining of manganese ore and in view of the fact that part of the taxed profits arose from sale of stocks of ore minded previously to the account year but in the winning of which the machinery was instrumental, this same machinery should not be considered as being used for the purpose of "business" and the depreciation on it allowed as a deduction under Sec. 10(2) (vi) in the account year." 2. As pointed out by the Commissioner of Income tax, in his opinion, the second question is not ready a distinct one, and the only point in the case is the interpretation to be put on the phrase "used for the purpose for the business" which occurs in Sec 10(2)(iv) of the Income Tax Act. This phrase has undoubtedly to be real into the subsequent sub-sec. (vi) under which depreciation can be claimed. The assessees contention is that the phrase does not mean "actually used for such purpose" during the account year but that the machiners was "not used for other purposes". It seems to us a straining of the language to turn a positive description into a negative one, and that interpretation would allow an assessee to claim depreciation for machinery, which although suitable for the business, had never been brought into use at all; and also to go on claiming depreciation for years together without using the machinery, provided only that the accumulated stocks were being gradually disposed of. The assessee would distinguish the case of N. D. Radhakishen & Sons v. Commissioner of Income Tax, Punjab, on the ground that the facts are different. No doubt that the case concerned a motor car and not factory machinery, but the general principle discussed and decided was precisely the same, and the decision is adverse to the assessees present contention. The answer in that case was that the words "used for the purposes of the business" mean "used for such purposes during the accounting year". No doubt machinery may depreciate from disuse as well as from use, but, as noted by the Judges in that case, the allowance is granted not for depreciation as such, but for depreciation as a consequence of the earning of income or while employed in the earning of income. Section 10 was similarly found inapplicable in Sri Gopalji v. The Commissioner of Income tax, Punjab. There is also a case of this court, Bhikaji Venkatesh v. The Commissioner of Income tax, Central and United Provinces which goes against the assessees contention, and he has not been able to produce any other case in his favour. No doubt on the above view, as depreciation is allowed only for a number years, the effect of the machinery lying idle might be that full allowance of depreciation is not finally recover. The result might, however, be got over by using the machinery for a short time each year. The plain significance of rule must be adhered to, and we must decide in favour of Income-tax Commissioner. We therefore answer the first part of question (1) in the affirmative, and the second part in the negative; and state the second question does not require any separate answer. Costs of this application will have to be borne by the non-applicant assessee. Pleaders fee will be Rs. 50. Reference answered accordingly.;

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