Law: Income Tax Act, 1922

Section: 66(2),10(2)(vi)

Income-tax Act, 1922 -- Section 10(2)(vi) --Depreciation -- Ice factory -- Machinery kept in readiness for use but idle under pool arrangement -- Whether machinery used for purposes of business -- Held no -- Whether entitled to depreciation allowance -- Held no -- Word "used", meaning of --Depreciation allowance -- Use of machinery not consistent with its functional utility and existence or not related to earning of profits by making use of machinery as such -- Held, would not entitle owner thereof to claim depreciation -- JUDGMENT The Judgment of the Court was delivered by S. RAHMAN, J.. ---The Commissioner of Income-tax, Lahore Zone, Lahore has raised the following question of law under Section 66(2) of the Income-tax, arising out of the Tribunal's order dated 9-12-1970 in Income-tax Appeals No. 1834 and 1835 of 1969-70 for the assessment years 1962-63 and 1963-64:- "Whether on the facts and in the circumstances of the case the Tribunal was right in holding that depreciation allowance under Section 10(2)(vi) of the Income-tax Act is admissible in respect of the Rawalpindi Ice Factory not actually used during the year." 2. The assessee was the owner of an ice factory at Rawalpindi. During the assessment years 1962-63 and 1963-64 he entered into a pool agreement with other owners of similar factories whereby he was required to keep his plant in readiness for use but was not to run it independently unless called upon to do so. For such inactivity which as a fact extended throughout the assessment year, he was to receive a specified sum out of the income from running of other factories. At the end of the years he received a sum of Rs. 11,000 as his share and while accounting for it the assessee claimed a depreciation of Rs. 6462 under Section 10(2)(vi) of the Income-tax Act for the machinery for the year 1962-63 and Rs. 5922 for 1963-64. The Income-tax Officer taxed the receipt of Rs. 10,000 as lease money but refused to allow the depreciation allowance on the ground that factory had not run and therefore the assessee was not entitled to any depreciation allowance. On appeal the Appellate Assistant Commissioner held that:- "The word "used" denotes both passive as…

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