Law: Income Tax Act, 1961

Section: 32(1)(iii)

Income-tax----Depreciation---Balancing charge---Revenue treating property as belonging to the assessee for purposes of depreciation under S.32(1)(ii) of Indian Income Tax Act, 1961---Assessee entitled to balancing allowance in respect of the property--¬Indian Income Tax Act, 1961, S.32(1)(iii). The assessee had constructed first floor property on leased terrace at a cost of Rs.1,04,012. Depreciation of Rs.46,878 had been allowed on it. The assessee claimed balancing charge of Rs.57,134 on it: Held, that the Tribunal had found that the Revenue had treated the property discarded as one owned by the assessee. The claim for the balancing allowance, i.e., cost, minus depreciation allowed in respect of the said property in terms of section 32(1)(iii) of the Income Tax. Act, 1961, was merely consequential and flowed from the Revenues own view as to the ownership of the property. JUDGMENT DR. B.P. SARAF, J. ---By this reference under section 256(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal has referred the following question of law at the instance of the Revenue to this Court for opinion: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee-company did not hold a lease of a building for the reason that it held a lease of terrace of a building? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the case of the assessee-company was covered by section 32(1)(iii) of the Income Tax Act, 1961?" The controversy in this case related to the entitlement of the assessee to the balancing allowance of Rs.57,134 in terms of section 32(1)(iii) in respect of the first floor property which was constructed by the assessee on a leased terrace at the cost of Rs.1,04,012 which was discarded during the year under consideration. The answer to the above controversy depends on whether the provisions of…

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