Judgement

Appeal (No. 68 of 1932) from a judgment of the High Court (July 10, 1931) upon a reference to that Court under s. 66 of the Indian Income-tax Act, 1922.

The respondents, a joint Hindu family, had been assessed to tax for the year 1928- 1930 under the Indian Income-tax Act, 1922, in respect of the income, profits and gains derived by them from (inter alia) buildings erected by them upon land leased to them. They had not appealed from the decision of the High Court that the assessment in question was properly made under s. 12 (" Other sources"), not

s. 9 ("Property"), nor s. 10 ("Business"). The only question arising upon the present appeal by the Commissioner was whether the respondents were entitled under s. 12, sub-s. 2, to an allowance in respect of expenditure incurred by them before April 1, 1928, in erecting the buildings.

The terms of the reference to the High Court, and the facts of the case, together with the terms of the material provisions of the Act, appear from the judgment of the Judicial Committee.

The learned judges of the High Court (Mukerji and Allen JJ.) were of opinion that as the assessee would lose the advantage of his expenditure upon erecting the buildings at the conclusion of the lease the expenditure was not of a capital nature and that he was entitled to an allowance in respect of it ; they held that the allowance should be in the form of an annual deduction

Law Rep. 60 Ind. App. 307 ( 1932- 1933) Commnr. of Income-Tax v. Basant Rai Takhat Singh

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of a thirtieth part of the expenditure— the lease being for thirty years.

1933. April 27, 28. Dunne K.C. and R. P. Hills for the appellant. The only question upon this appeal is whether the allowance claimed is permissible under s. 12, sub-s. 2, of the Act.

[LORD TOMLIN. Should not the assessment have been under s. 9 ?]

That question does not arise, as the assessee has not appealed from the decision of the High Court that in respect of the income in question he was assessable under s. 12, not under s. 9 or s. 10 ; the assessee contended that either s. 9 or s. 10 applied.

By s. 4 "all income " under each of the heads mentioned in s. 6 is taxable subject to the deductions specifically allowed. Sect. 12 does not provide for an allowance for depreciation of capital value. It is a well established principle under the English income-tax Acts that even if sums are actually set aside for that purpose they still form part of the taxable income. In re Gooptu Estates, Ld. (( 1929) I. L. R. 57 C. 910, 917.), referred to by the High Court, appears to recognize that no allowance could be made under s. 12 for the wasting of an asset.

[LORD RUSSELL OF KILLOWEN. Must not the " expenditure " referred to in s. 12, sub-s. 2, be made in the year of assessment ?]

Yes, each year is a self-contained period for the purpose of assessment Income-tax Commissioner v. Chitnavis. (( 1932) L. R. 59 I. A. 290.) If the Board take that view it is not necessary now to discuss further the other question which, however, is of great importance.

The respondents did not appear.

April 28. The judgment of their Lordships was delivered by

LORD TOMLIN. This is an appeal by the Commissioner of Income-tax of the United Provinces of Agra and Oudh from a judgment of the High Court of Judicature at Allahabad, dated July 10, 1931, upon a reference of questions made to the High Court by the Commissioner of Income-tax under s. 66 of the Indian Income-tax Act, 1922.

The question arises in this way The assessee is a Hindu undivided family. The assessment in question was an assessment made for the year 1929-30. The assessee was assessed on an income of Rs. 57,979. Of this Rs. 14,425 were derived from property owned by the assessee and were assessed under s. 9 of the Income-tax Act. The remainder, Rs. 43,554, were assessed under s. 12 and were derived from the rents of buildings erected by the assessee upon land leased from the Agra Cantonment authority.

The assessee appealed and his appeal was rejecte