Law: Income Tax Act, 1961

Section: 32(1)(iii)

Income-tax----Obsolescence---Assessee constructing building on leasehold land--¬Surrender of leasehold land alongwith building to lessor as per agreement---No discarding or demolition of building within the meaning of S.32(1)(iii)--¬Assessee not writing off loss in books---Obsolescence allowance under S.32(1)(iii) could not be claimed---Indian Income Tax Act, 1961, S.32(1)(iii). The assessee had taken land on lease. Under the lease agreement, the assessee took only the site. It spent a huge amount and put up a structure on the land. According to the lease deed, on the expiry of the term of the lease, the land along with any structure thereon was to revert back to the lessor without any compensation. Accordingly, the assessee surrendered the leasehold land along with the building standing thereon on March 31, 1972, to the lessor. In the assessment year 1972-73, the Assessee claimed the loss arising from the transaction under section 32(1)(iii) of the Income-tax Act, 1961. The claim was rejected by the Income-tax Officer and the Tribunal. On a reference: Held, (i) that section 32(1-A) was not applicable as the expenses incurred in this case were long prior to March 31,1970. (ii) That the surrender of the lease could not be equated to the discarding of the building or demolition of the building as contemplated under section 32(1)(iii). Even assuming that section 32(1)(iii) could be invoked the assessee was not entitled to the benefit of the provision inasmuch as it had admittedly not satisfied the condition imposed by the proviso to the section, namely, the deficiency had not been actually written off in the books of the assessee. JUDGMENT The Income-tax Appellate Tribunal, B Bench, Patna, has referred the following question of law for the decision of this Court under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"): "Whether, on the facts and in the circumstances of the case, tile, assessee was entitled to Rs.98.434 under section 32(l)(iii) of the Act?" The brief facts are the following: The assessment year in question i.5 1972-73. The assessee in its return claimed a loss of Rs.98.434 as allowably under section 32(1)(iii) of the…

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