9911796707
TMI Blog1980 (2) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... residence of the managing director of the assessee-company ? " M/s. Har Prasad Co. (P.) Ltd., the assessee, were the managing agents of M/s. Escorts Ltd., a public limited company. The assessee-company owned a house at Jor Bagh which was partly used as the guest house for the company's guests and partly as the residence of its managing director, Shri H. P. Nanda. This house was furnished with electrical apparatus, air-conditioner, fans, furniture and fixtures, cutlery and crockery. The question in this reference is whether the assessee-company was entitled to claim depreciation in respect of these assets belonging to it but provided in the house abovementioned which was being used as the guest house and the residence of the managing di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts had been sold to the company by her on April 30,1956, for Rs. 34,465. He referred to the nature of the assets and also referred to the fact that the assessee was a private limited company comprising of three shareholders of whom Mr. and Mrs. Nanda, between themselves, owned the majority of shares and, therefore, had substantial interest in the company within the meaning of s. 2(6C)(iii) of the Act. He pointed out that since these assets were used by the two directors in their place of residence and the company did not derive any benefit directly by acquiring these assets and also the possession of such costly assets were not warranted by the legitimate business needs of the company, the depreciation had to be disallowed under s. 10(4A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present purpose. So far as the question of depreciation is concerned, it proceeds on the same basis as the orders passed for the assessment years which form the subject-matter of the present reference. The Tribunal has merely proceeded on the footing that since the building is used by the managing director in accordance with a contract of service under which the company was bound to provide him with furnished accommodation the entire depreciation was admissible, treating the assets as laid out wholly and exclusively for the purposes of the company's business. Apart from the provisions of s. 10(4A), there is a plausibility about the line of reasoning taken by the Tribunal. If there had not been any such statutory provision perhaps the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the explanation to s. 10(4A) provides that this sub-section would apply notwithstanding that any amount disallowed under this sub-section is included in the total income of any person referred to in the clause. For the above reasons we have come to the conclusion that the Tribunal has committed an error of law in disregarding the provisions of s. 10(4A) in coming to a conclusion in the matter. Nothing that we have said should be considered as a finding that the provisions of this clause apply nor do we say anything as to whether the finding of the ITO or the AAC in this regard are correct or not. We are of the opinion that, the Tribunal committed an error in ignoring the provisions of s. 10(4A) while considering the issue of depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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