1962 (5) TMI 48 - HC - Income Tax

Summary

Issues:
Interpretation of Indian Income-tax Act regarding depreciation for assets let out on hire for a specific period.

Analysis:
The case involved a dispute over the entitlement to depreciation for assets let out on hire for a specific period under the Indian Income-tax Act. The assessee, engaged in manufacturing kohlus, let them out to agriculturists for the crushing season. The Income-tax Officer allowed depreciation for only the period the kohlus were let out, while the Appellate Assistant Commissioner granted full depreciation for twelve months. The key contention was whether the depreciation should be assessed under section 10 or section 12 of the Indian Income-tax Act.

The court determined that since the hiring of kohlus was part of the assessee's business, section 10, relating to income from business, applied for assessing depreciation. The court emphasized that the depreciation claimed for the assets let out on hire was governed by clause (vi) of sub-section (2) of section 10, which detailed allowances for depreciation of assets owned by the assessee.

The court referred to rule 8 of the Indian Income-tax Rules 1922 to determine the percentage of depreciation. The dispute arose regarding the application of the provisos in rule 8. The department argued for the first proviso, allowing depreciation only for the actual period of hire, while the assessee contended for the second proviso, enabling depreciation for the entire year. The court analyzed the historical context of the rule and held that the second proviso applied, allowing depreciation for the full year as the assets were let out for the entire crushing season.

The court rejected the narrow interpretation of the term "seasonal factory" in the second proviso, emphasizing that it covered assets like kohlus used in seasonal businesses. The court concluded that the assessee was entitled to depreciation for the full year under the second proviso to rule 8. The judgment was delivered in favor of the assessee, upholding their claim for depreciation for the entire year.