Ranganath Misra, J. - (1.) This appeal is by certificate and is directed against the judgment of the High Court of Allahabad. Assessee and five of his brothers constituted a Hindu joint family. The relevant assessment year is 1953-54 corresponding to the accounting period ending on 30th June, 1952. The joint family which owned inter alia a sugar factory at Bijnore. In 1930 there was partition in the family and the members of the erstwhile joint family constituted themselves into a partnership firm which took over the sugar factory and operated the same. In the year 1944, Sheo Prasad, one of the brothers who was a partner of the firm instituted a suit in the Lahore High Court for dissolution of the firm. Partition of the country followed and after the parties shifted over to India a fresh suit was instituted at Bijnore for purposes of partition. The properties were put in charge of a receiver appointed by the Court. So far as the sugar factory is concerned, the arrangement was that at five yearly rest an auction was to be held confined to the partners and the highest bidder would be given lease to operate the factory for that period under the receiver. On 16th July, 1948, Sheo Prasad transferred his 1/6th share to Banarsi Dass at a stated valuation of Rs. 4,50,000/-. On 3rd May, 1950, another brother, Devi Chand, leased out his 1/6th share to Banarsi Dass on an annual payment of Rs. 50,000/-. On 13th July, 1950, yet another brother, Kanshi Ram, similarly leased out his 1/6th share to Banarsi Dass for a similar sum. In 1951, Kanshi Ram sued for cancellation of the lease. On 6th April, 1954, the dispute was compromised and the lease was terminated. Kanshi Ram undertook to pay to Banarsi Dass at the rate of Rs. 16,000/- for the first three years and at the rate of Rs. 10,000/- for the subsequent two years. Devi Chand's 1/6th share was also returned on mutual arrangement and he agreed to pay a sum of Rs. 39,000/- and odd annually to Banarsi Dass for the lease period. During the assessment proceedings, the nature of these receipts came to be debated the assessee maintained that these were in the nature of capital receipt in lieu of the leasehold interest and the Income-tax Officer maintained that those were revenue receipts. In due course, the Tribunal ultimately upheld the view of the Revenue.
(2.) One more question that arose was the admissibility of a claim of expenditure being payment of interest on a loan taken for purchase of shares in the sugar factory. The Income-tax Officer had allowed the claim of Rs. 75,211/-. The Appellate Assistant Commissioner gave notice to the assessee and disallowed the same. The Appellate Tribunal reversed the finding of the Appellate Assistant Commissioner in regard to the admissibility of the claim. Thus the assessee as also the Revenue applied to the Tribunal to refer the case to the High Court. As far as relevant, the following questions were referred for the opinion of the High Court under S. 66(1) of the Act at the instance of the assessee. 1. Whether on the facts and in the circumstances of the case, the sums of Rs. 16,000/- and Rs. 39,262/- received from Kanshi Ram and Devi Chand respectively were assessable as income of the assessee 2. Whether on the facts and in the circumstances of the case, depreciation is allowable on the 1/6th share in S. B. Sugar Mills, Bijnore which the assessee had acquired from Seth Shiv Prasad So far as the first question is concerned, the High Court referred to the arrangement entered into by the parties as also the terms of compromise and referred to certain decisions and came to the conclusion that the sum of Rs. 16,000/- received as a part of the total sum of Rs. 68,000/- constituted an assessable receipt. On the same reasoning, the High Court held that the amount of Rs. 39,262/- received from Devi Chand was also liable to tax.
(3.) So far as the other question is concerned, the High Court held:- "The question, however, remains whether the assessee is entitled to claim depreciation on the ground that it has acquired 1/6th share in the S. B. Sugar Mills. It is to be noted that the assessee does not claim to be full owner of the property. All that the assessee claims is 1/6th share in S. B. Sugar Mills." "The assessee claims allowance under clause (vi) of sub-s. (2) of S. 10 Income-tax Act of 1922. Clause (vi) is: 'In respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee .............'." "In order to qualify for an allowance under clause (vi), the assessee has to make out that the building, machinery plant or furniture is the property of the assessee. Mr. Shanti Bhushan appearing for the assessee urged that clause (vi) is attracted even where an assessee owns a fractional share in the machinery. On the other hand, Mr. Brij Lal Gupta appearing for the Department urged that ownership of a fractional share in machinery does not attract clause (vi). The point is not free from difficulty.";