COMMISSIONER OF INCOME TAX/WEALTH TAX, FAISALABAD ZONE, FAISALABAD VS Dr. BASHIR AHMED, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 2585 (2006)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 31(1)(c) & 136---Income from property---Depreciation of property---Benefit---Assessee rented out his hospital with furniture and professional equipments and claimed depreciation on his property---Assessing officer declined to give any depreciation on properties, as claimed by assessee, on the ground that the property was not in use of the assessee---Income Tax Appellate Tribunal allowed the appeal of assessee and directed Assessing Officer to allow the depreciation---Validity---Assessee declared his income from three sources i.e. salary, private practice and lease amount of his hospital as well as rental income from his property---Revenue posed question of law in such a manner that it seemed that the Authorities were themselves confused and were not sure that under what head, rental income should be treated---Tribunal treating it as income from property had directed Assessing officer to allow depreciation, keeping in view the relevant provisions of law---Question as posed by the Revenue did not arise out of Tribunal's order, therefore, High Court refrained from answering the same---Appeal was disposed of accordingly.

Yousaf Umar for the Appellant.

ORDER

The assessee is owner of property bearing Property No.432-D, Peoples Colony, Faisalabad which is furnished with beds furniture and other professional instruments, rented it out with all the fixtures, furniture etc. at a monthly rent of Rs.15,000.

2. The assessee declared his income from profession, house property and salary. The Income Tax Officer did not allow during the assessment year, the claim of depreciation in respect of hospital as the same was not in use for business by the assessee himself. The show-cause notice was issued to the assessee that the business concern/hospital was leased on rent, the deductions claimed from rental income be disallowed. Vide order dated 10-9-1997, learned Tribunal directed the Assessing Officer to allow depreciation according to the relevant provisions of law. Through instant appeal following question of law was referred:---

"Whether on facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was justified to hold that depreciation be allowed to the assessee whereas depreciation under section 31(1)(c) is only admissible when the condition precedent of the Third Schedule i.e. ownership of the assessee and use of the same for the purpose of business, profession or vocation carried out by the assessee are available?"

3. Before dilating upon the question of law, as framed above, we would like to refer to. the relevant provisions of the repealed Ordinance.

19. Income from House Property:---

(1) The annual value of property shall be chargeable under the head' Income from house property."

(2) for the purpose of subsection (1),---

(a) "house property" means any property consisting of any building or lands appurtenant thereto of which the assessee is the owner, but does not include any such property (or any portion thereof) which is occupied by the assessee for purposes of any business or profession carried on by him the profits whereof are chargeable to tax under this Ordinance; and

30. Income from other sources:

(1) Income of every kind which may be included in the total income of an assessee under this Ordinance shall be chargeable under the head "Income from other sources", if it is not included in his total income under any other head.

(2) In particular, and without prejudice to the generality of the provisions of subsection (1), the following incomes shall, save as otherwise provided in this Ordinance, be chargeable under the head "Income from other sources", namely:-

(a) dividend;

(b) interest, royalties and fees for technical services;

(c) ground rent;

(d) income from the hire of machinery, plant or furniture belonging to the assessee and also of building belonging to him if the letting of the business is inseparable from the letting of the said machinery, plant or furniture; and

4. We have heard the rival arguments of the learned counsel for the parties at length and minutely examined the record.

5. The assessee/respondent in this case declared his income from three sources i.e. salary, private practice and lease amount of his hospital as well as the rental income from his property. The Revenue has posed the question of law in such a manner that it seems that the Revenue Authorities are themselves confused and are not sure that under what head the rental income should be treated. The Tribunal treating it as income from the property has directed the Assessing Officer to allow depreciation, keeping in view of the relevant provisions as discussed by it in para 5 of the impugned order. The question as posed by the Revenue does not arise out of the Tribunal's order; therefore, we refrain from answering the same.

M.H./C-33/LOrder accordingly.