Law: Income Tax Act, 1922

Section: 66(1)

Rule 8 of the Indian Income-tax Rules, 1922 - Depreciation - Rate of - Assessment year 1950-51 - Whether studio buildings consisting of studio sheds, painting and make up work, laboratory for editing, synchronizing sound etc. and carpentry section where there were lathes, sawing machines etc. operated by electric motors were factory buildings entitled to double depreciation provided for in rule 8 - Held, yes - Whether once certain building comes within definition of 'factory building', assessee would be entitled to depreciation allowed under rule 8 irrespective of whether nature of buildings or character of work done there is of such a character that would entail only a comparatively small depreciation compared with regular factory buildings - Held, yes FACTS The assessee derived income from a studio, where motion pictures were produced. Under rule 8 of the Income-tax Rules, depreciation at certain rates is allowed on the assets utilised for business. For the assessment year 1950-51, the assessee claimed that he was entitled to double depreciation under the terms of the rule in respect of certain buildings which he claimed to be factory buildings. It was conceded that the buildings in question come under the third class specified in rule 8. The ITO did not accept the claim of the assessee that he was entitled to 15 per cent prescribed under the rule as, according to him, the studio buildings could not be regarded as factory buildings. The AAC however accepted the assessee's claim; but, on further appeal by the department, the Tribunal called for a report from the ITO as to whether the buildings could be said to be factory buildings. According to the remand report submitted by the ITO, there were studio sheds, painting and make-up work, a laboratory for editing films, synchronizing sound, etc., also a carpentry section, where there were lathes, sawing machines, etc., which were operated by electric motors. The remand report thus, disclosed that a considerable part of the building was used for factory purposes. The Tribunal, accordingly held that the building was a factory for the purpose of grant of double depreciation provided for in rule 8, and sustained the…

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