1962 (4) TMI 117 - HC - Income Tax

Summary

Issues:
Claim for double depreciation on studio buildings under rule 8 of the Income-tax Rules.

Analysis:
The judgment revolves around the claim for double depreciation on studio buildings under rule 8 of the Income-tax Rules. The assessee, deriving income from a studio where motion pictures are produced, claimed entitlement to double depreciation for certain buildings considered as factory buildings under the rule. The Income-tax Officer initially rejected the claim, stating that studio buildings cannot be classified as factory buildings. However, the Appellate Assistant Commissioner accepted the claim, leading to an appeal by the department. The Tribunal sought a report from the Income-tax Officer to determine if the buildings qualified as factory buildings. The report confirmed that manufacturing processes were conducted in the building, including editing films, carpentry work, and other factory-related activities. The Tribunal concluded that the building met the definition of a factory for the purpose of double depreciation under rule 8. The department then sought a reference under section 66(1), posing the question of whether the studio buildings qualified for double depreciation as factory buildings under the Income-tax Rules.

The High Court analyzed the facts presented, emphasizing that the key consideration was whether the building fell within the definition of a "factory" building as per rule 8, regardless of the comparative depreciation levels with other factories. The Court noted that the building satisfied the requirements of the Factories Act's definition of a factory. The Court clarified that the entitlement to depreciation under the rule hinged on meeting the definition of a factory building, irrespective of the depreciation levels compared to regular factories. Therefore, the Court upheld the Tribunal's decision, ruling in favor of the assessee and affirming their entitlement to double depreciation on the studio buildings. The department was directed to bear the costs of the assessee.