Law:

Section:

Section 44A of the Income-tax Act, 1961-Trade/professional association-Assessee-association had no income from business or profession-Whether depreciation claimed by it in respect of furniture, etc., could be treated as expenditure incurred, for purpose of section 44A and deducted in computing deficiency under said section-Held, yes Words and phrases-"Expenditure incurred" occurring in section 44A Facts The assessee-association, a body registered under the Indian Trade Unions Act, 1962, had income from interest on securities, from jute chronicle and from interest. For the assessment year 1969-70, it claimed the benefit of deduction of deficiency of Rs. 19,934 under section 44A. This deficiency included a sum of Rs. 14,846 representing depreciation in respect of furniture, air-conditioners, etc. The ITO disallowed the claim on the ground (i) that being a non-trading association it was not entitled to claim depreciation ; and (ii ) that the assets were not used for business. On appeal, the AAC upheld the order of the ITO observing that depreciation was not an expenditure to be taken into account for computing the deficiency under section 44A. On further appeal before the Tribunal, the assessee contended (i) that the impugned amount of depreciation, which was calculated according to the provisions of the Act and which was not claimed for computation of income under any other head, was an expenditure incurred solely for the purpose of protection or advancement of the common interest of the assessee-association ; (ii ) that in the Act depreciation under section 32 was treated as any other expenditure enumerated under section 37(1) ; and (iii) that commercial principles must be applied for the determination of deficiency under section 44A. The Tribunal took the view that (i) in the commercial world, the ascertainment of true profits of a business always involved a deduction of depreciation because it was one of the several items that appeared in the profit and loss account; (ii) that under the provisions of the Act, depreciation was found allowable in the determination of the income from business as also in the determination of certain categories of income falling…

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