1968 (8) TMI 39 - HC - Income Tax

Kerala Agricultural Income Tax Act, 1950 - assessee showed income by way of rent of building occupied by some of his employees and claimed depreciation and repairs thereon - plantations of assessee had not reached the stage of production - assessee had several houses and showed income only on letting out a few of such houses - Whether depreciation and repairs for all houses is allowable - Held, yes

Summary

Issues:
- Whether depreciation and maintenance expenditure were allowable for all buildings or limited to those actually let out and generating rent?

Analysis:
The case involved a question regarding the allowance of depreciation and maintenance expenditure for buildings owned by the Plantation Corporation of Kerala Ltd. The assessee claimed deductions for repairs and depreciation for all its buildings, while the Income-tax Officer disallowed the claim citing that the plantations were still in the development stage. The Appellate Assistant Commissioner considered the rent received as agricultural income but disallowed the repair and depreciation claims until the plantations reached the production stage. The Appellate Tribunal allowed the rental income but restricted the deductions to buildings generating rent. The Tribunal referred the question to the High Court.

The deductions for repairs and depreciation were claimed under clauses (d) and (l) of section 5 of the Agricultural Income-tax Act, 1950. The Revenue argued that allowances were not permissible until the plantations yielded income, while the assessee contended that deductions were allowable regardless of income, citing a Supreme Court decision. The High Court agreed with the assessee, emphasizing that deductions could be claimed even in the absence of income, following established legal principles.

The High Court referred to Section 12 of the Act, which allows carrying forward of losses in agricultural income to subsequent years for set-off. Citing legal precedents, the court reiterated that expenses incurred for the trade or agricultural purposes, even if unremunerative, are deductible if incurred wholly and exclusively for that purpose. The court emphasized that the presence of income in a particular year was not a prerequisite for claiming deductions under the Act.

In conclusion, the High Court ruled in favor of the assessee, affirming that the deductions for repairs and depreciation claimed for all buildings were permissible, irrespective of whether all buildings generated income. The court highlighted the established legal principle that allowable deductions should not be dependent on the presence of income in a specific year. The judgment was forwarded to the Appellate Tribunal as required by the Act.