COMMISSIONER OF INCOME TAX Vs. SUNDARAM INDUSTRIES

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following question for the opinion of this Court under s. 256(1) of the IT Act, 1961 :

(2.) THE assessee is a private limited company. It maintained some cars for the purpose of business. THE contention of the Revenue was that since the cars were also used for the personal use of the directors, depreciation allowable on the written down value of the cars should be proportionately reduced and disallowed by applying s. 40(c) of the IT Act. THE Tribunal for the earlier assessment years held that s. 40(c) provides for disallowance of any expenditure or allowance in respect of any assets of the company used by any person either wholly or partly for his own purposes or his benefit, but the proviso indicated that the allowance referred to in the section must be one capable of being adjudged as excessive or unreasonable. THE Tribunal found that depreciation which is allowable at a prescribed rate is an allowance which can never come for adjudication as excessive or unreasonable and, therefore, the deduction for depreciation had to be given without any disallowance under s. 40(c) even if the cars had been used for personal purposes of the directors.