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Issues:
1. Interpretation of whether the loss claimed by the assessee was a capital loss or a revenue loss under section 10(2)(vii) of the Indian Income Tax Act, 1922. Analysis: The judgment delivered by the High Court of Delhi pertained to a reference under section 66(2) of the Indian Income Tax Act, 1922, regarding the treatment of a loss claimed by the assessee. The case involved the assessment of the New Bank of India Ltd for the assessment year 1956-57 concerning the sale of premises No. 25, Pusa Road, New Delhi. The assessee claimed a loss of Rs. 67,969 from the sale, contending it was allowable under section 10(2)(vii) of the Act. The Income Tax Officer (ITO) disallowed the claim, which was later allowed by the Appellate Assistant Commissioner (AAC) but disallowed again by the Income-tax Appellate Tribunal, leading to the reference to the High Court. The primary issue revolved around the interpretation of section 10(2)(vii) of the Act, which allows for an allowance if there has been a sale of a building used for business purposes. The written down value of the property was a key factor in determining the loss claimed. The ITO and the Tribunal emphasized two objections - first, that the property was not acquired in satisfaction of banking dues and second, that the property was let out to employees and assessed under a different category in certain years. However, the Court held that these objections were not conclusive in determining the nature of the asset and its usage for business purposes. The Court relied on precedents and legal principles to establish that even if a property is used to accommodate employees and generate rental income, it can still be considered as being used for business purposes. The Court highlighted that the provision of residential accommodation to employees can be crucial for business operations and can be treated as incidental to the main business activity. It was emphasized that the property need not be directly occupied by the company itself to qualify as being used for business purposes. In conclusion, the Court reframed the question to focus on whether the assessee was entitled to claim the loss under section 10(2)(vii) of the Act. The Court ruled in favor of the assessee, stating that the property was a capital asset used for business purposes, and therefore, the claim for the loss was valid under the specified section of the Income Tax Act.
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