SETH BANARSI DASS GUPTA & ANR. ETC. versus COMMISSIONER OF INCOME-TAX, DELHI.

Citation: [1987] 3 S.C.R. 101 · Decided: 29-04-1987 · Supreme Court of India · Bench: RANGANATH MISRA · Disposal: Dismissed

Judgment (excerpt)

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'I 
SETH BANARSI DASS GUPTA & ANR. ETC. 
A 
v. 
COMMISSIONER OF INCOME-TAX, DELHI. 
APRIL 29. 1987 
[RANGANATH MISRA AND G.L. OZA, JJ.] 
B 
Income-tax Acr, 1922: s. 10(2)(vi), s. 24-Depreciation-Benefir 
of-Admissible only where assessee full owner of property-Assessee 
alone entit/,R:(i to maintain claim-Carried forward loss-Claim for ser 
off-When admissible-Assessee surrendering lease of partnership 
share for annuity-Nature of receipts-Whether profit for the inreresr C 
held in business. 
'A', a partner in a firm running a sugar factory, instituted a suit 
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for its dissolution in I948 and a Rereiver was appointed by the Court. 
The arrangement arrived at for the factory was that it would be leased 
out for a term of five years to the highest bidder from amongst the six D 
partners. In July, I948, 'A' transferred his I/6th share to the appellant 
for Rs.4,50,000. The appellant had taken a loan against shares of that 
value held by him in another sugar mill for purchase of the share. In 
>--
May, 19541, another partner 'B' leased out his I/6th share to the appel-
lant on an annual payment of Rs.50,000. In July, 1950 yet another 
partner 'C' leased out his I/6th share to the appellant for a similar sum. 
E 
In 195I 'C' sued for cancellation of the lease. In April, 1954 the dispute 
was compromised and the lease terminated. 'C' undertook to pay the 
appellant a.t the rate of Rs.16,000 for the first three years and at the rate 
- of Rs.I0,000 for the subsequent two years. 'B's I/6th share was also 
. returned on mutual arrangement and he agreed to pay the appellant a 
sum of Rs.39,000 and odd annually. 
F 
During the assessment proceedings for the year I953-54 the 
nature of these receipts came to be considered. The assessee-appellant 
maintained that these were in the nature of capital receipts in lieu of the 
lease-hold interest. The assessee also claimed depreciation on the I/6th 
share in the sugar mill that he had acquired from 'A'. Similar questions G 
also arose for the assessment years 1954-55 and I955-56. The assessee 
had suffered a loss in the sugar business in the assessment year 1953-54, 
a part of which remained unabsorbed, and claimed set off of that un-
absorbed loss against the share of the rent received by him from the 
Receiver in the assessment year 1954-55. Since the sugar mill was being 
assessed as an association of persoas, for the usessmeat year 1964HiI 
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SUPREME COURT REPORTS 
[1987] 3 S.C.R. 
A the Receiver claimed that for the purpose of computing depreciation 
allowance, the written down value of the business assets be enhanced so 
as to reflect the sum of Rs.4,50,000 in place of I/6th share representing 
the share of 'A'. The Revenue negatived the assessee 's contentions, 
which view was upheld by the High Court. 
B 
c 
D 
E 
F 
Dismissing the appeals by certificate, the Court, 
HELD: 1. The amounts the assessee received under the com-
promise or by amicable arrangement from other partners were in the 
nature of profits to be received by the assessee for the interest held in 
the business and, therefore, constituted taxable income. [I06BJ 
2. The benefit of s. l0(2)(vi) of the Income-tax Act, 1922 would be 
admissible only where the assessee is the owner of the property. It too is 
not admissible in respect of a fractional claim. [106A] 
In the instant case, all that is claimed for the assessee is 1/6th 
share in the machinery. Such a fractional share does not suffice 
for granting an allowance for depreciation under s. 10(2)(vi) of the 
Act. [105F) 
3. Two conditions had to be fulfilled under s. 24 of the Income-
tax Act, 1922 before the claim for set off of carried forward loss could 
be admitted, firstly, the income against which the loss has to be set off 
should be income from business and secondly, the business should be 
same in which the loss was suffered. [107C] 
In the instant case, the letting out of the suga· mill was not the ~ 
business of the assessee. The Receiver was appointed for dissolution of 
the firm aud the main reason for allowing the sugar factory to work 
was to dispose it of as a running mill so that proper price could be 
fetched. [107DE] 
4. Under the scheme of 1922 Act, it is the assessee who aloue is 
G 
entitled to maintain claim of depreciation. Within the framework of 
that scheme it is difficult to maintain separate value of a part of the _ J. 
asset to work out depreciation. The book-value, as shown must in the -, 
instant case, th

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