1967 (9) TMI 10 - HC - Income Tax

Loss - demolition of a part of the building - even if loss is not actually written off in the books of the assessee - assessee is entitled to the allowance u/s 10(2)(vii)

Summary

Issues Involved:
1. Entitlement to allowance under section 10(2)(vii) for partial demolition of a building.
2. Requirement of writing off the loss in the books of the assessee.

Detailed Analysis:

Issue 1: Entitlement to Allowance under Section 10(2)(vii) for Partial Demolition of a Building
The core question was whether the assessee is entitled to an allowance under section 10(2)(vii) of the Indian Income-tax Act for the demolition of part of a building. The Income-tax Officer initially disallowed the claim, arguing that the building was not fully demolished and only two-thirds of it had been demolished, thus not qualifying for the allowance under section 10(2)(vii). The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal both rejected this view, stating that there is no provision in the Income-tax Act that restricts the allowance to the complete demolition of a building. The Tribunal emphasized that the words "in respect of any such building" in the section should include part of the building. The High Court agreed, noting that the context of the clause, which includes machinery and plant, implies that partial demolition should also qualify for the allowance. The court concluded that the word "building" in clause (vii) of section 10(2) includes part of the building.

Issue 2: Requirement of Writing Off the Loss in the Books of the Assessee
The second issue was whether the assessee is entitled to the allowance even though the loss was not actually written off in the books of the assessee. The Income-tax Officer disallowed the claim on this ground, but the Appellate Assistant Commissioner and the Tribunal rejected this objection. The Tribunal remarked that the department was being overly technical, and the loss could not be entered in the books because the property was never shown as an asset of the assessee-firm. The High Court agreed, noting that the proviso to section 10(2)(vii) does not make it an absolute condition precedent. The court emphasized that the proviso is more of a qualification rather than a strict condition precedent. The court also observed that if the amount could not be written off due to genuine reasons, the assessing officer could still grant the allowance. The court concluded that the assessee was entitled to the allowance despite the loss not being written off in the books, as the property was never shown as an asset of the firm.

Conclusion:
The High Court answered the question in the affirmative, holding that the assessee is entitled to the allowance under section 10(2)(vii) for the partial demolition of the building and that the failure to write off the loss in the books does not disqualify the assessee from claiming the allowance. The Commissioner was ordered to pay the costs of the assessee.