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TMI Blog1935 (10) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... in companies from which such buildings and machinery were acquired by the respondent company. 4. The material facts, as stated in the case which the Commissioner of Income-tax referred for the opinion of the High Court under Section 66 (l) of the said Act, are as follows:- 5. The Buckingham and Carnatic Company, Limited, (hereinafter referred to as the company ) is a public limited company which was incorporated on November 29, 1920, under the Indian Companies Act, 1913. 6. The objects of the company were to acquire, take over, amalgamate with, work and carry on the businesses hitherto carried on in Madras and elsewhere by five limited companies which were registered under the Indian Companies Act and the goodwill of the said businesses, to enter into and carry into effect an agreement which had bean prepared and was expressed to be made between the said five companies, their liquidators and the company, to carry on the business so to be acquired, and generally to carry on the business of cotton spinners. 7. The said five companies were incorporated on various dates ranging from 1876 to 1888. 8. The above-mentioned agreement was entered into on December 3, 1920. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax, Madras, the appellant in this appeal. 18. The appellant, as already stated, referred the case to the High Court. The first question submitted in the case for the opinion of the High Court was as follows:- Question 1.- Whether the Buckingham and Carnatic Company, Limited, which succeeded to the business of the Buckingham Mill Company, Limited, the Carnatic Mill Company Limited, the Jamalmadugu Press Company, Limited, the Tiruppur Press Company, Limited and the Tadpatri Cotton Press Company, Limited, is entitled under Section 10 (2) (vi) of the Act, to depreciation allowance on the assets taken over from the five predecessor companies calculated on the original cost of these assets to such predecessor companies or on the value at which these assets were taken over by the Buckingham and Carnatic Company, Limited, from the predecessor companies ? 19. The appellant agreed with the decisions of the Bombay and Patna High Courts and expressed the opinion that the allowance to be made in respect of depreciation of the assets acquired from the predecessor companies by the company should be calculated by reference to the value at which such assets were acquired by the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uent years to the Buckingham and Carnatic Company, Limited, the amount allowed to predecessor company shall be taken into account in applying Section 10 (2) (vi) proviso (c) of the Act. The main question is the first. The section of the Indian Income-tax Act, 1922, which relates to this question is Section 10, and the material part thereof is as follows:- 10. (1) The tax shall be payable by an assessee under the head Business in respect of the profits or gains of any business carried on by him. (2) Such profits or gains shall be computed after making the following allowances, namely :- (vi) in respect of depreciation of such buildings, machinery, plant, or furniture being the-property of the assessee, a sum equivalent to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed : Provided that- (b) where full effect cannot be given to any such allowance in any year owing to there being no profits or gains chargeable for that year, or owing to the profits or gains chargeable being less than the allowance, the allowance or part of the allowance to which effect has not been given, as the case may be, shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and natural meaning of the words used must be taken as the proper construction. 28. The sub-section provides for the allowance in respect of depreciation of buildings and machinery, which are the property of the assessee, to the extent of the percentage prescribed on the original cost thereof to the assessee. The word assessee is used in the sub-section in two places: firstly, with regard to the ownership of the property, and secondly, with regard to the original cost thereof. 29. In the ordinary and natural meaning of the sub-section the word assessee used in the two connections must refer to the same person. Who then is that person ? The answer is given by the sub-section itself, namely, the person who owns the property in question and who is being assessed, and the depreciation is to be based on the original cost of such property to such person, viz., in this case the company. If there were any doubt about this being the correct interpretation, it would be removed by reference to the definition of assessee contained in Section 2 (2) of the Act. The word means the person by whom income-tax is payable, in this case the company. 30. It follows therefore that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Income-tax Act, 1922, refer to the original cost to the person who is being actually assessed and not to the previous owner of the business. (2) Consequently assessees are entitled to have the depreciation allowance under the said Section 10 (2) (vi) of the said Act calculated on the original cost to them and not to the previous owner from whom they have purchased the business. 36. In Motiram Rosan Lal Coal Company, Ltd. v. Commissioner of Income-tax (1932) I.L.R. 12 Pat. 12, the High Court of Patna approved of and followed the above-mentioned decision of the Bombay High Court, and dissented from the decision of the Madras High Court in The Commissioner of Income-tax, Madras v. Messrs. Massey Co. Ltd., Madras. 37. For the reasons already stated their Lordships agree with the decisions of the Bombay and Patna High Courts in the above-mentioned cases on the question now under consideration. 38. In view of that conclusion, it is not necessary for their Lordships to express any opinion on the second, third or fourth questions submitted to the High Court in this case, for, as the Commissioner pointed out in his reference, these questions only arise if it should be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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