Whether the term "Business" includes "Profession" for the purpose of depreciation u/s 32(1)(iv) of Income Tax Act, 1961

The appellant is a firm of Chartered Accountants in Ahmedabad.  The Assessment relates to the Year 1984-85 for the financial year ending on 31.03.1984.  During the relevant year the appellant constructed a building for the purpose of residence for its low paid employees and claimed initial depreciation @ 40% under Section 32(1)(iv) of the Act amounting to Rs.43,505/- on the actual cost of the building i.e. Rs.1,08,757/-.  The Income Tax Officer (ITO) vide its order dated 15.1.1985 rejected the claim of the assessee-appellant on the ground that the said provision is applicable to an assessee carrying on "business" and the same is not available to a professional.  

The provisions of Section 32(1)(iv) as stood during the relevant period:

(iv) in the case of any building which has been newly erected after the 31st day of March, 1961, where the building is  used solely for the purpose of residence of persons employed in the business and the income of each such person chargeable under the head "Salaries" is ten thousand rupees or less, or where the building is used solely or mainly for the welfare of such persons as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch-room, a sum equal to forty per cent of the actual cost of the building to the assessee in respect of the previous year of erection of the building.

While rejecting the contention of the assessee, honorable supreme court has said:

There is nothing in Section 32(1)(iv) which envisages the scope of word "business" to include in it "profession" as well.  If the expression "business" is interpreted to include within its scope "profession" as well, it would be doing violence to the provisions of the Act.  Such interpretation would amount to first creating an imaginative lacuna and then filling it up, which is not permissible in law.   The contention of the counsel for the appellant that Section 32(1)(iv) should be given purposive interpretation to include "profession", has thus to be rejected.   

(For full text of Judgment - Please visit 2007 -TMI - 2224 - Supreme Court of India)