PANDYAN INSURANCE COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Pandyan Insurance Company Ltd. is the assessee which carries on the business of general insurance. By about the end of 1952, it had erected a substantial building at a cost of over rupees twelve lakhs. For the account year 1952, being the calendar year, the company wrote off as depreciation a small of Rs. 4,412. THE depreciation claimed was only for one month in that year which relevant for the assessment year 1953-54. This appears to have been allowed by the department. For the succeeding year 1954-55, the account year being the calendar year 1953, the assessee purported to write off a sum if Rs. 1,21,245 as depreciation in respect of the buildings, the air conditioning plant, lifts, transformers and internal telephones. THE Income-tax Officer disallowed four-fifths of the depreciation claimed on the ground that only a fifth part of the building was utilised for the business of the assessee. On appeal, the Appellate Assistant Commissioner disagreed with the view taken by the Income-tax Officer that any part of the depreciation was allowable. He held that the depreciation allowance in the case of a business of insurance must be limted to the actual and real depreciation and that as the buildings were new, there was no depreciation which needed such cover on the balancesheet. He disallowed the whole of the claim. In the appeal before it, the Appellate Tribunal restored the order of the Income-tax Officer. THE view that it took was that in so far as the four-fifths of the building was concerned, since it was not used for the purpose of the business which the assessee carried on, that part of it must be regarded only as an investment. While holding that under the relevant rule depreciation could be claimed, the Tribunal still thought that such depreciation should only be claimed to the limits of actual and real depreciation and not a notional value. Accordingly four-fifths of the depreciation claimed was disallowed.

(2.) ON the application of the assesee, the Tribunal referred the following question for the determination of this court :

(3.) IN Western INdia Life INsurance Co. Ltd., IN re, the interpretation of rule 30 which was almost of the same scope as rule 3(b) came for consideration. That rule provided :