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TMI Blog1980 (1) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... tra Sugar Mills Ltd. [1971] 82 ITR 452 was valid in law? (2) Whether, on the facts and in the circumstances of the case, the decision of the Tribunal for the assessment year 1970-71, that the various lines of activity like the tea estate, coffee estate, coffee curing plant, etc., did not constitute one single and integrated activity or business but were independent units of business is a correct inference on the facts found and is valid in law? (3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in its conclusion that the managing agency commission and the head office expenses had to be allocated between the various sources of income, i. e., tea, coffee, curing works, and done in the mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a portion of the expenses incurred by the head office was considered to be relatable to the coffee and tea estates, the ITO made an apportionment of the expenditure in the head office as well as of depreciation. In answering the three questions, as indicated already, we have held in effect that the expenditure in the head office would have to be apportioned among the different businesses. We are now concerned with the depreciation claimed by the assessee. The ITO allowed only a proportionate part of the depreciation, and the AAC upheld this action of the ITO. The amount so disallowed is Rs. 28,810. The assessee took the matter on appeal to the Tribunal. The Tribunal pointed out that the assessee had to maintain a head office and that merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute about the ownership of the assets and that there could be no dispute about the using of the assets for the purposes of the business carried on by the assessee. In the submission of the learned counsel for the assessee, the fact that the assessee's head office looks after certain other activities does not mean that the assets are not exclusively used for the purposes of the business, income of which is brought to tax. On this aspect, the learned counsel for the Commissioner drew our attention to s. 38 which runs as follows: " 38. (1) Where a part of any premises is used as dwelling house by the assessee, (a) the deduction under sub-clause (i) of clause (a) of section 30, in the case of rent, shall be such amount as the Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , of the depreciable assets for the purposes of the business or profession. The question is whether the depreciable assets in the present case are not exclusively used for the purpose of the business. On a prima facie basis, it may be pointed out that the assessee has been using, the assets for purposes of the business, the income from which has been brought to tax. It may be that the assets are useful for other businesses, but that does not in any way affect the conclusion that the assets have been used for the purposes of the business, the income from which is brought to tax. Section 37 of the Act provides for allowance of any expenditure laid out or expended wholly and exclusively for the purposes of the business or profession. In de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness activities. In such a case proportionate allowance is contemplated. In a case where the claim would have been allowed on the ground that the expenditure was laid out for purpose of the business, then the circumstance that it is beneficial to a non-business activity is beside the point, and s. 38(2) does not apply to such a case. In other words s. 38 is applicable only to those cases where the expenditure or allowance relates to a business only in part. It does not apply where the asset is wholly, and not partially, used for the purpose of the business. The learned counsel for the Commissioner drew our attention to s. 36(1)(iii) and a decision rendered by this court under that provision. Section 36 provides that the deductions provide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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