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Issues Involved:
1. Entitlement to proportionate depreciation for the portion of the building let out to tenants. 2. Entitlement to proportionate depreciation for lifts and air-conditioning plant related to the let-out portion. 3. Entitlement to development rebate for lifts and air-conditioning plants in the let-out portion. Summary: Issue 1: Entitlement to Proportionate Depreciation for the Portion of the Building Let Out to Tenants The court considered whether the assessee, Punjab National Bank, was entitled to full or proportionate depreciation on a building where one floor was let out. The building, located on Parliament Street, New Delhi, served as the bank's head office, with five out of six floors used for its business. The Income Tax Officer (ITO) and the Appellate Assistant Commissioner (AAC) allowed only proportionate depreciation (five-sixths), but the Tribunal allowed the entire depreciation. The court held that only five-sixths of the building was used for business purposes, and thus, proportionate depreciation was correct. The court reasoned that the building must be divided into portions for tax purposes under sections 9 and 10 of the Indian Income-tax Act, 1922, with the let-out portion taxed under section 9 and the business-used portion eligible for depreciation under section 10. Issue 2: Entitlement to Proportionate Depreciation for Lifts and Air-Conditioning Plant Related to the Let-Out Portion The court examined whether the lifts and air-conditioning plant, which were part of the head office, should receive full or proportionate depreciation. The ITO and AAC allowed only proportionate depreciation, but the Tribunal allowed the entire claim. The court held that depreciation should be allowed in full for the lifts and air-conditioning plant, as they were integral to the head office and used for business purposes, despite being accessible to tenants and visitors. The court emphasized that these assets were under the bank's control and used wholly for its business. Issue 3: Entitlement to Development Rebate for Lifts and Air-Conditioning Plants in the Let-Out Portion The court addressed whether the lifts and air-conditioning plant qualified for development rebate under section 10(2)(vib) of the Indian Income-tax Act, 1922, which requires the assets to be "wholly used" for business purposes. The ITO and AAC disallowed the rebate, but the Tribunal allowed it. The court referred to conflicting judgments from the Madras and Kerala High Courts on the interpretation of "wholly used." The court concluded that the lifts and air-conditioning plant were wholly used for the bank's business, as they were under the bank's control and not leased out to tenants. The court held that the development rebate was allowable, as the assets were used exclusively for business purposes. Conclusion: 1. Proportionate depreciation was correctly allowed for the let-out portion of the building. 2. Full depreciation was allowable for the lifts and air-conditioning plant. 3. Development rebate was allowable for the lifts and air-conditioning plant, as they were wholly used for business purposes. The court answered the questions partly in favor of the assessee and partly in favor of the Department, with each party bearing its own costs.
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