1. Depreciation allowance under section 10(2)(vi) of the Income-tax Act is granted to the owner of the property and it is immaterial as to who uses the asset. 2. A donation made to an institution to which section 15B of the Income-tax Act applies is eligible for exemption from taxation.

JUDGMENT - Kotval, C.J.

1. Two items claimed by the assessee have been allowed to them and in regard to them two question have been framed. The first item is of Rs. 53,634, which the assessee claimed for depreciation on their assets for the assessment 1956-57. The other is an item of Rs. 6,600, in respect of which the assessee claimed exemption under section 15B of the Income-tax Act. We will separately state the facts relating to each item as we deal with it.

2. Regarding the sum of Rs. 53,634, on account of depreciation, the facts in brief are that the Cement Marketing Co. of India Ltd., which is a subsidiary of the assessee, the Associated Cement Co. Ltd., was at one time appointed a common sales manager for the assessee and several other companies, namely, the Patiala Cement Co. Ltd., and the Dalmia group of cement companies. This was by an agreement dated 4th June, 1942. In 1948, however, the Dalmia group dropped out of the arrangement and since then the Cement Marketing Company was only attending to the sales on behalf of the assessee and its subsidiary, the Patiala Cement Co. Ltd., On 21st April, 1954, the agreement with the Cement Marketing Company was renewed for a period of ten years with effect from 1st August, 1953. The Patiala Cement Co. Ltd., was amalgamated with the assessee-company on 1st April, 1954. From the date 1st August, 1953, all the assets of the Cement Marketing Company were taken over by the assessee-company and the entire assets appear in the books of the assessee as the assessees assets. The position of the Cement Marketing Company today is that it is not paid any selling commission of any other remuneration for acting as sales manager but the assessee-company annually reimburses to the Cement Marketing Company all its working expenses in full both for work done for the assessee-company as well as for the Patiala Cement Company, with the result that so far as the Cement Marketing Company is concerned its revenue account is balanced annually leaving no surplus and no deficit because such deficit as there may be is reimbursed to them by the assessee-company.

3. Now, the assets of the Cement Marketing Company, which were taken over by the assessee, consisted of office equipment, motor vehicles and other assets. As we have said, they appear in the books of the assessee-company as the assets of the assessee but for the purpose of the management of the assessee-companys sales, these assets are being utilised by the Cement Marketing Company for the business of marketing the products of the assessee and its subsidiary, in their capacity as sales manager. It was on these assets that the figure of Rs. 53,634 was computed as the annual depreciation for the assessment year 1956-57, and the short question that has been posed is whether the assessee-company would be entitled to be allowed this depreciation in the year of account.

4. The Income-tax Officer took the view that the Cement Marketing Company was a separate legal entity from the assessee-company and since the assets were in fact being used by the Cement Marketing Company, it cannot really be said that the assets were being used for the purpose of the assessees business. This order was set aside by the Appellate Assistant Commissioner in appeal, who took the view that the assets irrespective of who was using them actually belonged to the assessee and, therefore, the requirements of section 10(2) (vi) were satisfied. He, therefore, allowed the depreciation to the assessee-company. The view of the Appellate Assistant Commissioner has been upheld by the Tribunal. The view which the Tribunal took was "the Marketing Co. is on the above facts factually only another department of the assessee though for legal purposes it is separate entity,. The assets in question have, therefore, only been used by the assessee in the course of its carrying on its business. The decision of the Appellate Assistant Commissioner is right and accrodingly upheld."

5. The terms in wh

Click Here to Read the rest of this document