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Issues:
1. Interpretation of section 32(1)(iv) of the Income-tax Act regarding written down value calculation. 2. Correct interpretation of Circular No. 372 dated December 8, 1983. Issue 1: Interpretation of section 32(1)(iv) of the Income-tax Act regarding written down value calculation: The case involved a dispute over the calculation of depreciation under section 32(1)(iv) of the Income-tax Act for the assessment year 1984-85. Initially, the Assessing Officer granted depreciation based on the written down value provided by the assessee. However, in a subsequent proceeding under section 154, the Assessing Officer reduced the written down value by the depreciation granted under section 32(1)(iv) due to an amendment by the Finance Act, 1983. The Tribunal held that the amendment was prospective and only applied to assets with initial depreciation granted from April 1, 1984. The key contention was whether the one-time benefit of 40% depreciation under clause (iv) should be deducted while determining the written down value for subsequent years. The Tribunal's decision was based on the prospective nature of the amendment, emphasizing that the one-time benefit should not affect the written down value calculation for the assessment year 1984-85 onwards. Issue 2: Correct interpretation of Circular No. 372 dated December 8, 1983: The Revenue relied on Circular No. 372, issued by the Central Board of Direct Taxes, to support its contention that the assessing authority could deduct the one-time special deduction of 40% granted under clause (iv) for calculating the written down value from the assessment year 1984-85 onwards. The circular clarified that the amendment to section 32(1)(iv) by the Finance Act, 1983, would apply to the assessment year 1984-85 and subsequent years, even if initial depreciation had been allowed in earlier years. However, the court disagreed with this interpretation, stating that the one-time benefit of 40% depreciation under clause (iv) was not applicable to buildings erected in previous years. The court emphasized that the effect of the amendment would only be felt in cases where initial depreciation was granted for specified assets from April 1, 1984, onwards. In conclusion, the court ruled in favor of the assessee, answering question No. 1 in the affirmative and question No. 2 in the negative against the Revenue. The judgment clarified the interpretation of section 32(1)(iv) of the Income-tax Act and the application of Circular No. 372 in determining the written down value for the assessment year 1984-85 and subsequent years.
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