1949 (9) TMI 28 - HC - Income Tax

Summary

Issues: Proper depreciation allowance for machinery.

In this case, the primary issue before the Bombay High Court was to determine the correct depreciation allowance for machinery owned by the assessee, the Rajratna Naranbhai Mills Co., Ltd. The dispute arose regarding the interpretation of Section 10(2)(vi) and Section 10(5)(c) of the Income Tax Act, specifically concerning the calculation of the written down value of the assets for the purpose of depreciation. The assessee contended that the written down value should be based solely on the actual cost of the assets without any deduction for depreciation applicable but not allowed in previous years. On the other hand, the Tribunal held that the depreciation applicable to the assets since 1922 must be deducted from the actual cost to determine the written down value. The court emphasized that the language of the statute was clear, and the term used was "depreciation applicable," not "depreciation allowed." Therefore, the assessee was required to deduct the applicable depreciation rates from the actual cost of the assets, irrespective of whether they had received any depreciation benefit in prior years. The court rejected the contention that it was inequitable to deduct depreciation amounts when no depreciation had been allowed previously, stating that the assessee could not seek the benefit of depreciation without having paid taxes earlier. The court concluded that the written down value had to be calculated by deducting the applicable depreciation rates, as mandated by the Act, and ruled in favor of allowing depreciation based on this calculation.

Regarding the second question raised in the reference, the court expressed difficulty in understanding the query and emphasized the importance of clarity in framing questions for consideration. As neither party could clarify the intent behind the second question, the court declined to provide an opinion on it, highlighting the responsibility of the Tribunal to present clear and comprehensible questions for judicial review.