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Interpretation of section 34 of the Income-tax Act, 1961 regarding depreciation allowance for Malaysian assets of a banking company for assessment years 1970-71 to 1972-73. Detailed Analysis: The judgment delivered by the High Court of Madras pertains to a reference made by the Tribunal regarding the correctness of allowing depreciation allowance for Malaysian assets of a banking company for the assessment years 1970-71 to 1972-73. The dispute arose when the Income-tax Officer disallowed the depreciation claimed by the assessee for its Malaysian assets due to the unavailability of prescribed particulars as required under section 34 of the Income-tax Act, 1961. The Appellate Assistant Commissioner, however, directed the Income-tax Officer to calculate the depreciation on a reasonable basis by considering the proportion of the written down value of all company assets to the book value of the Malaysian assets. The Appellate Assistant Commissioner also instructed the assessee to provide relevant particulars for verification. The Revenue challenged this direction, arguing that it contravened section 34 of the Act. During the proceedings, the assessee contended that the business was a composite one, and since the Income-tax Officer failed to determine the written down value, the method adopted by the Appellate Assistant Commissioner was reasonable. The Tribunal, relying on the decision of the Calcutta High Court and the Supreme Court in similar cases, upheld the Appellate Assistant Commissioner's approach. The Tribunal acknowledged the difficulties faced by the assessee in determining the written down value post-nationalization of Indian branches, leading to the necessity of a reasonable method for calculating depreciation for Malaysian assets. The High Court, in its analysis, rejected the Revenue's argument that strict compliance with section 34 was necessary, considering the unique circumstances of the case, particularly the nationalization of the banking company's Indian branches. Citing the Supreme Court's ruling in Guzdar Kajora Coal Mines Ltd. v. CIT [1972] 85 ITR 599, the High Court emphasized the need for a practical and reasonable approach in such situations. Additionally, the High Court drew support from a previous decision involving a similar issue concerning the Indian Bank's Malaysian assets, where depreciation was allowed on a proportionate basis due to the unavailability of item-wise particulars. Ultimately, the High Court upheld the Tribunal's decision, affirming that depreciation on Malaysian assets could be granted on a proportionate basis in the absence of specific particulars, as long as the assets were used for business purposes. The Court agreed with the Appellate Assistant Commissioner and the Tribunal's stance that the withdrawal of depreciation benefits solely based on the lack of item-wise particulars was unjustified. Consequently, the High Court answered the question in favor of the assessee, dismissing the Revenue's appeal and awarding costs to the assessee's counsel.
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