Law:

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Section 38 of the Income-tax Act, 1961 - Building, etc. partly used for business Where assessee-company, during assessment year in question, had entered into an agreement with a party by virtue of which it transferred 85 per cent of its daily restaurant and bar sales proceeds to latter in lieu of materials and labour supplied by said party, it was clear that fixed assets of assessee were not being utilized exclusively for its business purposes thereby attracting provisions of section 38(2) and hence assessee was entitled to only proportionate depreciation on its assets Where the assessee-company, during the assessment year in question, had entered into an agreement with a party 'M' by virtue of which it transferred 85 per cent of its daily restaurant and bar sales to the latter in lieu of materials and labour supplied by it and applying section 38(2), the Assessing Officer allowed only 18 per cent of depreciation claimed by assessee . Held that it was the case of assessee that M was taking away 85 per cent of the total receipts from the bar as well as from the restaurant of the assessee. Thus, it was clear that the fixed assets of the assessee were not being utilized by him exclusively for its business purposes, thereby attracting the provisions of section 38(2). The Assessing Officer in his assessment order had observed that the assessee had not been able to prove any control over the business and there was no mechanism for the assessee to prevent M from arbitrarily withdrawing from the alleged arrangement. As M was carrying away 85 per cent of the gross receipts of the assessee, that clearly showed that the assessee did not use its fixed assets exclusively for its own business purposes. Therefore, the Assessing Officer's order was to be upheld. Yogesh Kumar Jagia for the Appellant. Mrs. P.L. Bansal for the Respondent. JUDGMENT V.B. Gupta, J.-The present appeal has been filed under section 260A of the Income-tax Act, 1961, challenging the order dated August 17, 2007, passed by the Income-tax Appellate Tribunal Delhi Bench "F" in I.T.A. No. 3032/D/2004, relevant for the assessment year 2001-02, vide which the appeal filed by the assessee was dismissed. The…

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