1. The question which the Commissioner refers to us is:
Whether where an assessee owns a number of businesses A, B, C and D, and the profits and gains of business A are insufficient to cover the full depreciation admissible under Section 10 (2) (vi) of the Act on the machinery, plant, etc., used for the purpose of that business, the excess depreciation can be set off against the profits and gains of the other businesses B, C and D?
2. The assessee is an unregistered firm carrying on the business of (1) grocery and rice, (2) money-lending, (3) Soda factory, (4) rice-mill, (5) foreign liquor shops, and (6) motor service. The profits of the last-named, the motor service, for the year to which the assessment relates, amounted only to Rs. 253, whereas the firm claimed an allowance of Rs. 10,542 on account of depreciation. Under Section 10 (2) (vi) of the Act, in computing the profits or gains of a business, allowance may be made, within certain prescribed limits, in respect of depreciation of buildings, machinery, etc., and the question we have to answer is whether, taking this case as an example of the general proposition addressed to us, the allowance may be set against not only the small profit of Rs. 253 earned by the motor service but against the profits earned by the other five businesses.
3. Section 10, which deals with the assessment of a business to tax, provides that the profits or gains shall be computed after making allowances in respect of charges classified into nine divisions, examples of which are rent, cost of repairs, interest on borrowed capital, etc. Admittedly, in respect of each of these charges except depreciation it is open to the assessee to include the whole sum which he represents in his balance sheet, with the result, it may be, that a minus balance or loss on the business is shown. Then, if he has more than one business, or even more than one head of income, as described in Section 6, he is entitled under Section 24 to set off the loss in the business against any profits or gains received under another head. In other words, if the charge is any one of those named in Section 10, other than depreciation, the question which the Commissioner refers to us must, upon the plain terms of the Act, be answered in the affirmative. It is said, however, that allowance for depreciation stands upon a different footing from the other allowances, and, as an indication of this, our attention is directed to proviso (b) under Clause (vi) of Section 10 (2). It lays down that:
Where full effect cannot be given to any such allowance in any year owing to there being no profits or gains chargeable for that year, or owing to the profits or gains chargeable being less than the allowance, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following year and deemed to be part of that allowance, or, if there is no such allowance for that year, be deemed to be the allowance for that year, and so on for succeeding; years.
4. Taking the words 'profits or gains chargeable for that year' to refer only to the profits or gains of the business in which the depreciation occurs, it is contended that this proviso allows only one way of treating the charge; that so much of it as cannot be neutralised by profits must not figure as an actual loss, but must be carried forward into the next year's account. But neither from the language used, nor from any general considerations arising from the nature of the charge are we satisfied that this construction is correct. But for the proviso, depreciation stands upon the same footing, and should, so fat-as any intention to the contrary appears, be dealt with in the same way as the other charges enumerated in the section; and it is a well-known principle of construction (see West Derby Union v. Metropolitan Life Assurance Society (1897) A.C. 647 that a proviso should not by mere implication withdraw any part of what the main provision has given. We do not think, therefore, that upon the terms of the section an assessee is precluded from adding the whole charge for depreciation to his other business charges, even though the result is to show a loss, and then claiming under Section 24 to set off the loss against profit from other source. Nor have we been shown that there is anything in the nature of this allowance for depreciation to render such a course inadmissible. The learned Advocate for the Crown argues that it is not a business expense or loss, but rather a sum set apart to make good a loss of capital. There is an observation in The Spanish Prospecting Co., Ltd., In re (1911) 1 Ch. 92 that depreciation is a business loss. That, however, was not an income-tax case, and no doubt there may be a business loss of capital as well as of profits. We do not propose to pursue this line of inquiry further, as we have heard nothing in any sense conclusive upon the point. But it may be observed that a close analogy exists between money spent upon repairs to buildings, machinery, etc., and money set apart in respect of depreciation of such things, and that so far as we can discover there is no reason to treat differently the allowances in respect of these two classes of expenditure.
5. We have dealt with the question on the footing that the words 'business' and 'any business' occurring in Section 10 (1) relate only to the business in which the depreciation occurred--in this case the motor service. If, however, we construe 'any business' as meaning all the businesses put together, which was the construction put upon it in The Commissioner of Income-tax v. Arunachelam Chettiar I.L.R.(1923) M. 660 : 46 M.L.J then in proviso (b) 'profits or gains' will mean the aggregate profits or gains of all the businesses together, and we need look no further for an answer to the question proposed to us.
6. This construction has been adopted in a case recently decided by the Lahore High Court (Karam Ilahi v. Chief Commissioner, Income-tax, Delhi A.I.R. 1929 Lah. 556 where the same question arose in a slightly more extreme form and was decided in the same manner.
7. Our answer to the question referred to us is in the affirmative. The respondent will receive the costs of this application. Vakil's fee Rs. 250. Deposit to be returned.
Question answered in the affirmative.
8. O.P. No. 16 of 1929 is not pressed and is dismissed with costs. Vakil's fee Rs. 100.