1991 (8) TMI 33 - HC - Income Tax

Summary

Issues:
Entitlement to depreciation on the actual cost of acquisition of a motor car for assessment year 1982-83 when no depreciation was claimed or allowed for the previous assessment years 1979-80, 1980-81, and 1981-82.

Analysis:
The case concerned the entitlement to depreciation on the actual cost of acquisition of a motor car for the assessment year 1982-83, despite no depreciation being claimed or allowed for the previous assessment years 1979-80, 1980-81, and 1981-82. The Agricultural Income-tax Officer allowed depreciation based on the written down value of the car, which was calculated by deducting the depreciation value for the previous years. The Deputy Commissioner of Agricultural Income-tax and Sales Tax upheld this decision, stating that the depreciation allowed was in accordance with the law. The key contention was whether the failure to claim depreciation in previous years could affect the entitlement to depreciation on the full purchase value of the car for the current assessment year.

The court analyzed the relevant statutory provisions, specifically Section 5 of the Agricultural Income-tax Act, 1950, which allows for depreciation on assets required for deriving agricultural income. The court emphasized that the written down value for assets acquired before the previous year is the actual cost to the assessee less any prescribed sum. The court noted that the statutory authorities had relied on Rule 13 of the Kerala Agricultural Income-tax Rules, 1951, which pertains to assets acquired before the previous year. However, the court held that Rule 13 was not applicable in this case as it does not prescribe any deduction from the actual cost in such situations.

The court referred to precedents from the Calcutta and Bombay High Courts, which held that if no depreciation was actually allowed in prior years, depreciation should be based on the actual cost incurred by the assessee. Drawing parallels, the court concluded that in the absence of any prescription under the Agricultural Income-tax Act, 1950, depreciation should be allowed on the actual cost to the assessee for assets acquired before the previous year. Therefore, the court held that the assessee was entitled to depreciation on the actual cost of acquisition of the motor car, despite no depreciation being claimed or allowed in the previous assessment years.

In conclusion, the court answered the question in the negative, ruling in favor of the assessee and against the Revenue. The judgment clarified that the assessee was entitled to depreciation on the actual cost of acquisition of the motor car, emphasizing that the failure to claim depreciation in previous years did not negate this entitlement.