1933 (7) TMI 14 - HC - Income Tax

Summary

Issues:
1. Interpretation of "original cost" in Section 10(2)(vi) of the Income-Tax Act (XI of 1922).
2. Determining the method to ascertain the "original cost" of assets to the assessee.

Analysis:
The primary issue in this case before the Rangoon High Court was the interpretation of the term "original cost" as mentioned in Section 10(2)(vi) of the Income-Tax Act (XI of 1922). Chief Justice PAGE opined that "the original cost thereof to the assessee" refers to the assessee as defined in the Act, meaning the "person by whom income-tax is payable." This interpretation aligns with previous judgments by the Bombay High Court and the Patna High Court. The Court rejected the notion of tracing back the original cost to multiple successive owners and emphasized that the term "assessee" in Section 10(2)(vi) refers to the assessee as defined in the Act.

Furthermore, Chief Justice PAGE highlighted a divergence in interpretation between the Indian Income-tax Act and the English Finance Act, emphasizing that the material sections of the two Acts differ significantly. The Court expressed dissent from the Madras High Court's interpretation, which suggested that depreciation calculation should be based on the "original cost" to the predecessor in title of the assessee. Chief Justice PAGE stressed that the intention behind using the term "the original cost thereof to the assessee" was to ensure that the depreciation allowance is based on the property's value to the assessee when originally acquired, regardless of the mode of acquisition.

In determining the method to ascertain the "original cost" of assets to the assessee, Chief Justice PAGE suggested that for properties acquired by means other than purchase, the original cost should be the real value of the property at the time of acquisition, minus the necessary expenditure for completing the title. He indicated that probate charges paid by the assessees could be included in such expenditure. Justice DAS and Justice MYA BU concurred with Chief Justice PAGE's analysis and interpretation.

In conclusion, the Rangoon High Court answered the reference by affirming that the "original cost" of assets to the assessee should be determined based on the real value of the property at the time of acquisition, less the expenses required to complete the title, including probate charges if applicable. The judgment provides clarity on the interpretation of "original cost" in the context of depreciation allowance under the Income-Tax Act.