KAMLAPAT MOTI LAL Vs. STATE OF U P

JUDGEMENT

(1.) This is reference by the Income-tax Commissioner under Section 66 (2) of the Income Act (XI of 1922) and the main question that arises for consideration relates to the allowance to be made on account of depreciation of certain buildings, machinery etc., in computing the taxable profits of a certain ;Business;. The answer to this question depends on the true interpretation of Section 10(2) (vi) and Section 26(2) of the Act. Section 10 (2) (vi) provides that in computing profits or gains of any business for the purposes of income-tax allowance shall be made ;in respect of depreciation of such buildings, machinery, plant, or furniture being the property of the assessee, a sum equivalent to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed.; Section 26 (2) enacts that ;where at the time of making an assessment under Section 23, it is found that the person carrying on any business, profession or vocation has been succeeded in such capacity by another person, the assessment shall be made on such person succeeding, as if he had been carrying on the business, profession or vocation throughout the previous year, and as if he had received the whole of the profits for that year.

(2.) The reference arises under the following circumstances :-

(3.) On the 22nd of November 1926, the assessee filed an application in this court embodying alternative proposals to take a mortgage of the Mills or to purchase the same. The proposals embodied in the petition were as follows :-