NAIMUDDIN, J. -These two applications under section 66(1) of the Income-tax Act, 1922 (hereinafter called the Act) have been filed by the Commissioner of Income-tax, Karachi East, Karachi for answering the following question of law arising out of the order, dated 4-10-1971 passed by the Income-tax Appellate Tribunal:- "Whether on facts and. Circumstances of the case the Tribunal was justified in directing the Income-tax Officer to allow the full depreciation irrespective of the fact whether the car was not wholly used for the purpose of the business contrary to section 10(3) of the Income-tax Act, 1922."
2. The facts giving rise to these applications are that in the assessment year 1969-70, the respondent's half claim for the car expenses amounting to Rs. 1,812 and half claim for depreciation on the car amounting to Rs. 1,730 was disallowed by the Income-tax Officer as being of personal and non---trading nature by the order dated 30-6-1971. Similarly for the assessment year 1970-71, the respondent's half claim for the car expenses amounting to Rs. 5,082 and half claim for depreciation on the car amounting to Rs. 2,734 was disallowed by the Income-tax Officer as being of personal and non-trading nature by the order of the same date.
3. On appeals, the Income-tax Appellate Tribunal, by a common order, dated 4-10-1971, upheld the orders of the Income-tax Officer to the extent of disallowing half claim in respect of car expenses but allowed half claim on account of depreciation on the car for both the assessment years on the ground that the car was the asset of the respondent and the respondent was entitled to the statutory depreciation admissible under the law irrespective of the tact whether the car was used for the personal purpose of the directors or not. The Tribunal, in the order, observed that the disallowance of half of the car maintenance expenses claims was justified.
3-A. Before the Tribunal, it was argued by the Departmental Representative that the disallowance of half of the car maintenance expenses claims was justified on account of the personal use of car made by the Directors which was normal and usual. Moreso, when the directors, as in the present case, were not salaried employees of the assessee. He further argued that in this case it was not pointed out that the Directors had personal cars of their own. In regard to these arguments it was observed by the Tribunal.
"The argument of the learned -Departmental Representative has considerable substance and in the case of a private limited company it cannot be denied that there is identity of interest between directors and the company. Moreso, when the directors are not salaried employees of the Company as in the present case. No evidence has been laid as has be6n rightly pointed out by the Depart--mental Representative to the effect that the cars of the assessee are not used by the Directors and that they use the cars of certain other companies as has been urged by Mr. Lambat."
3-B. However, with regard to disallowance of half of the claims on account of depreciation of the car of the assessee, it is observed "As has been held by the Tribunal repeatedly the car is an asset of the assesses and irrespective of the fact whether the cars are used for the personal purpose of the directors or not the statutory depreciation admissible on the car will have to be allowed according to law."
4. We are of the opinion that the question referred to in these two applications for answer must be answered in the negative for the order has been passed by the Tribunal in complete disregard of the relevant provisions of section 10 of the Act which we will immediately quote her below: "10. (1) (Subject to the provisions of this Act, the tax) shall be payable by an assesses under the bead (Profits and gains of business, profession or vocation) in respect of the profits or gains of any (business, profession or vocation) carried on by him.
(2)(Subject to the provisions of this Act) such profits or gains shall be computed after making the following allowances, namely: -
(vi) in respect of depreciation of .Such buildings, machinery, plant, or furniture being the property of the assesses, a sum equivalent, where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other case, to such percentage on the written down value thereof as may in any case of class of cases be prescribed and where the buildings have been newly erected, or the machinery or plant not being motor vehicles not plying for hire or machinery or plant entitled to the development allowance under clause (vi-a) and not having previously been used in Pakistan has been installed in Pakistan, after the 31st day of March, 1945, a further sum in respect of the year of erection of installa--tion of the year in which such building, plant or machinery is used, by the assesses for the first time for the purposes of his business, profession or vocation or the year in which commercial production is commenced, whichever is the later equivalent.
5. The provisions with regard to allowance for depreciation are contained in section 10(3) of the Act which reads as follows: "(3) When any building, machinery, plant or furniture in respect of which any allowance is due under clause (iv), clause (v), clause (vi) or clause (vii) of subsection (2) is not wholly used for the purposes of business, profession or vocation, the allowance shall be restricted to the fair proportional part of the amount which would be allowable if such building, machinery, plant or furniture was wholly so used:
6. It is contended by Mr. A. Aziz, learned counsel for the respondent, that the case will be governed by the provisions of section 10 (2)(vi) of the Act which are general provisions relating to depreciation allowance and not by the provisions of subsection (3) of section 10 of the Act. The learned counsel has not been able to support the contention by any reasons. Moreover, the contention of the learned counsel is in complete disregard of the provisions of subsection (3) themselves for subsection (3) also refers to the cases falling under clause (vi) of subsection (2) which provides that any building, machinery, plant in respect of which any allowance is due under clause (vi) of subsection (2) is not wholly used for the purposes of business, profession or vocation, the allowance shall - be restricted to the fair proportional part of the amount which would be allowable, if such budding, machinery, or plant was wholly so used.
7. It is admitted that the car was not wholly used for the purpose o the business as the Tribunal itself has disallowed half of the claim for expensed of toe car for that very reason, and this part of the order has not bee questioned by the respondent.
8. The provisions of the Act are clear and unambiguous and do not admit two interpretations.
However, we may here refer to a passage from the famous book entitled "Law and Practice of Income-tax" by Sir Jamshedji B. Kanga and N. Palkhivala, 4th Edn. (1958), page 415 which reads as follows "Subsection (3). Partial allowance for assets partly used; or business.- --Where any building, machinery, plant or furniture is used in part for the business of the assesses and in part for other purposes, the allowance should not be the full allowance due under clauses (iv), (v), (vi) and (vii) of subsection (2) but should be confined, under this subsection, to an amount proportional to the business user. This subsection cuts down the allowance where the user is only partly for business purposes, but it does not apply to cases where the assets are used exclusively for business purposes but only for a part of the accounting year."
We may also refer to another passage from the same book which appears at pages 353 and 354:- Subsection (2) clause (vi-b).-Development rebate . . . . . Further, the development rebate, like depreciation allowance, may also be wholly or partly disallowed by the Income-tax Officer in the case of a Company if the assets of the. Company are used by a director or a person having a substantial interest in the Company either wholly or partly for his own purposes or benefit:
9. Therefore, the reason advanced by the Tribunal that since the car was the asset of the assesses/respondent, the whole amount claimed on account of depreciation must be allowed is untenable in the face of the statutory provisions-referred to above.
10. We accordingly, answer the question in negative.
11. The parties are left to bear their own costs.