Commissioner of Income Tax vs Punjab National Bank

Sabharwal, J.—In respect of the assessment year 1971-72, the following questions have been referred u/s 256(1) of the income tax Act, 1961:

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee was entitled, in determining the business profits to a deduction of proportionate depreciation in respect of the portions of the buildings which were let out to tenants and the income from which was determined u/s 22 of the income tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee was entitled to proportionate depreciation in respect of lifts and air-conditioning plants insofar as they related to the portions of the building which were let out to the tenants and the income from which chargeable u/s 22 of the income tax Act, 1961 ?

The building owned by the assessee-bank has six floors out of which third floor has been let out. The other floors are under the occupation of the assessee wherein it carries on its business. In respect of the very property similar questions arose during the assessment years 1960-61 to 1965-66 which were considered by this Court. The decision is reported in Punjab National Bank Ltd. Vs. Commissioner of Income Tax, Delhi I, Though the said questions were posed in the context of the provisions of the Indian income tax Act, 1922, the relevant provisions under the present Act are also similar.

The first question was answered in the negative and the second question was answered in the affirmative by this Court. It was held that the proportionate depreciation was not allowable in respect of the let out portion. However, regarding depreciation in respect of the lifts and air- conditioning plants the Court held that full depreciation was allowable.

The learned counsel for the revenue contended that the provisions of section 38(2) of the Act were not considered in the earlier decision. We do not think so. The ratio of the earlier decision involves consideration of a similar question. The Bench pointed out that the lifts and air-conditioning plant are fitted in the Head Office of the assessee and the fact that the air-conditioning plant and lifts may also be utilised by somebody who happened to be a tenant of one of the floors of the building would not make any difference. The same air-conditioning plant and lifts are likely to be used by the customers of the bank and any other visitor of the bank and this will happen practically in every case and no assessee can be said to be using the air-conditioning plant or the lifts only by himself. Even otherwise, the answer even in the earlier reference would substantially cover the present question. Consequently, the first question is answered in the negative and in favour of the revenue. The second question is answered in the affirmative and against the revenue. No costs.