I.P.MUKERJI,J. - (1.) The Court: After hearing learned Counsel for the parties we propose to dispose of both these appeals under Section 260A of the Income Tax Act, 1961 by this common judgment and order: Two questions of law are common in both the appeals. They are as follows: "(a) Whether on the facts and in the circumstances of the case, the building held on long term lease for 99 years and used admittedly for the purpose of business is eligible for depreciation allowance under Section 32, the long term lease being equivalent to ownership of the building? (b) Whether any part of the business expenditure can be disallowed under Section 14A on ad-hoc estimate of 1% of the dividend income where the investment of the assessee in securities has an integrality with the assessee's business as the guidelines of the Reserve Bank of India imposed on a Residuary Non-Banking Financial Company the mandatory requirement to have its funds invested in securities for the grant of the licence to carry on its business and the dividend is merely a by product and auto-generating income in the course of carrying on the - financing business?" One question of law is special to ITA 428 of 2007only. It is as follows: "(b) Whether on the facts and in the circumstances of the case, the following additions as stated below made in the assessment order taking the petitioner by surprise and without notice of the intended additions is violative of the principles of natural justice and due process of law and is liable to be set aside. (i) Rs. 1,28,67,199/- representing subscription received by the petitioner from its certificate-holders by cheques; (ii) The sum of Rs. 13,84,983/- representing subscription received by the petitioner from its certificate-holders by Money Order; and (iii) The sum of Rs. 7,11,124/- in the suspense account representing unadjusted cheques issued under its monthly income scheme;"
(2.) Section 32(1) provides for deductions allowed for depreciation of buildings, machinery, plant etc. owned wholly or partly by the assessee. Explanation 1 to the section clarifies that where the business or profession of the assesee is carried on in a building owned by him but of which the assessee holds a lease then he would be able to avail of the deductions on account of depreciation only if some capital expenditure was incurred by him in that building.
(3.) Mr. Chatterjee, learned senior Advocate appearing for the assessee has been able to convince the Court that on a combined reading of Section 269UA(f), defines transfer together with a Section 27(iiib) of the said Act a lessee of a building or plant with a lease of 12 years, as the assessee claims to be, in which business is carried out, would be deemed to be the owner of the said building.;