JUDGMENT 1. This is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the assessee and the following question of law has been referred to us by the Tribunal, which reads as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is not entitled to initial depreciation of Rs. 3,83,170 under Section 32(1)(iv) of the Income-tax Act, 1961 ?" The brief facts which are necessary for the disposal of this reference, are that the assessee is a M. P. State Government company incorporated under the Companies Act, 1956. The assessment year involved is 1979-80, the accounting period being from April 1, 1978, to March 31, 1979. For providing residences to persons employed in its business, the assessee claimed to have purchased from the M.P. Housing Board, Bhopal, residential quarters at a cost of Rs. 9,57,924 under a hire purchase agreement and claimed an initial depreciation at the rate of 40 per cent. and amounting to Rs. 3,83,170 under Section 32(1)(iv) of the Income-tax Act, 1961. The Income-tax Officer refused the initial depreciation under Section 32(1)(iv) of the Income-tax Act, 1961, and on appeal the same was affirmed and likewise it was affirmed by the Tribunal also. Hence, the assessee moved the Tribunal for making a reference before this court and the Tribunal has framed the aforesaid question for answer before this court. 2. We have heard learned counsel for the parties and perused the record. 3. Before we answer this question, it would be relevant to refer to the provisions of Section 32 which are material for determination and which existed at the relevant time, and read as under : "32. Depreciation.--(1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deduction shall, subject to the provisions of Section 34, be allowed--... Depreciation.--(1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deduction shall, subject to the provisions of Section 34, be allowed--... (iv) in the case of any building which has been newly erected after the 31st day of March, 1961, where the building is used solely for the purposes of residence of persons employed in the business and the income of each such person chargeable under the head "Salaries" is ten thousand rupees or less, or where the building is used solely or mainly for the welfare of such persons as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch-room, a sum equal to forty per cent. of the actual cost of the building to the assessee in respect of the previous year of erection of the building. . . . (2) Where, in the assessment of the assessee (or, if the assessee is a registered firm or an unregistered firm assessed as a registered firm, in the assessment of its partners), full effect cannot be given to any allowance under Clause (ii) of Sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of Sub-section (2) of Section 72 and Subsection (3) of Section 73, 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 previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years." Now, in the light of the aforesaid provisions which were in existence at the relevant time, Mr. Nema, learned counsel for the assessee, submitted that the assessee prayed for initial depreciation as required under Clause (iv) but the Tribunal has wrongly denied the same. The Tribunal, in its order has observed that : "... there is no material to show that the M.P. Housing Board erected these houses within the previous year of the assessee. Nema, learned counsel for the assessee, submitted that the assessee prayed for initial depreciation as required under Clause (iv) but the Tribunal has wrongly denied the same. The Tribunal, in its order has observed that : "... there is no material to show that the M.P. Housing Board erected these houses within the previous year of the assessee. For this reason we are of the view that the assessee's claim for initial depreciation allowance was not tenable. The authorities below have also rejected the assessee's claim on the ground that the gross salary of some of the employees to whom the houses have been allotted was more than Rs. 10,000". However, the Tribunal has observed that : "We agree with this contention and hold that it is the income determined in accordance with the provisions of the Income-tax Act chargeable under the head "Salaries" that would be relevant for the application of Section 32(1)(iv)." The main ingredients of the Clause (iv) are that : (i) there should be a newly erected building after 31st of March, 1961 ; (ii) the building is to be used solely for the purposes of residence of persons employed in the business and the income of each such person chargeable under the head "Salaries" should be ten thousand rupees or less ; and (iii) the building should have been constructed in the previous year of erection of the building, and then only the assessee will be entitled to forty per cent. initial depreciation of the actual cost of the building. Now, we have to examine the factual part, as to in this case whether the Tribunal had rightly denied the benefit of initial depreciation, to the applicant, under Section 32(1)(iv) of the Act or not ? 4. In this case, it is relevant to mention here that under Section 32(1)(2) depreciation is also granted and in the present case, the assessing authority has granted depreciation as is apparent from the assessment order, to the tune of Rs. 6,90,121. Therefore, so far as the fact of ownership is concerned that is well established that the assessee has been granted a depreciation treating this building to be owned by them. Therefore, it is not correct on the part of the Tribunal to say that no material has been placed to show whether the building has been owned by the assessee or not. Therefore, it is not correct on the part of the Tribunal to say that no material has been placed to show whether the building has been owned by the assessee or not. The circumstance that the building was assessed to be owned by the assessee and the Tribunal granted them the benefit under Section 32(2), of the depreciation to the extent of Rs. 6,90,121, therefore, denies the finding of the Tribunal that there was no material placed on record to show as to whether the assessee is said to be the owner of the building or not. Likewise, it is also wrong to say that the building was not erected in the previous year of the assessee. The building was constructed and actually, it was handed over to the assessee on March 9, 1979, as is apparent from the statement of the case, sent by the Tribunal. The Tribunal, in the statement of the case, has said that the assessee, in support of his contention, has produced the relevant record and in that it is pointed out that the possession letter dated March 9, showing the delivery of possession of the quarters, has been placed on record, that shows that in the previous year, i.e., from 1978-79, the possession of these quarters was handed over by the M.P. Housing Board on March 9, 1979, and that fact having been accepted even by the assessing authority, while granting the benefit of depreciation under Section 32(1)(2) is more evident that the possession of the building was delivered in the previous year. Therefore, this view taken by the Tribunal is also not correct. Similarly, it was stated in the statement of the case that these houses were given to the persons who were employees of the assessee, drawing less than ten thousand rupees. Therefore, it cannot be said that the houses were given to the persons whoso salaries were more than ten thousand rupees. Though the Tribunal has observed that whether the houses were constructed by the assessee or the houses have been taken by the assessee, who was the hire purchaser, will be treated to be the owner or not, but the Tribunal has not expressed any opinion, therefore, we need not dilate on this subject. Though the Tribunal has observed that whether the houses were constructed by the assessee or the houses have been taken by the assessee, who was the hire purchaser, will be treated to be the owner or not, but the Tribunal has not expressed any opinion, therefore, we need not dilate on this subject. Suffice it to say that it was a hew building constructed by the Housing Board in the previous year and the possession was given by the Housing Board on the March 9, 1979, and that fact stands corroborated from the assessing authority's order because the assessing authorities have themselves granted the benefit of depreciation to the tune of Rs, 6,90,121 to the assessee. Therefore, having accepted the assessee, being the owner of these houses for the previous year, this benefit was granted to the assessee. On the same facts, the assessee is also entitled to the benefit under Section 32(1)(iv) of the Act, i.e., initial depreciation on such buildings. 5. In this view of the matter, we are of the opinion that the view taken by the Tribunal is not correct. Hence, the reference is decided in favour of the assessee and against the Revenue.