1981 (11) TMI 41 - HC - Income Tax

Summary

Issues involved: Interpretation of profits u/s 41(2) for computation of depreciation and allowance of depreciation for assessment year 1971-72 on trucks sold in 1972-73.

Interpretation of profits u/s 41(2): The assessee derived rental income and income from plying trucks. The dispute arose when the assessee sold 3 trucks in 1972-73, purchased in 1971-72, and surrendered an amount for capital gains. The Income Tax Officer (ITO) considered the depreciation allowed in the previous year and deemed a profit of Rs. 23,700 for the current assessment year. The appellate authorities upheld this decision.

Depreciation allowance for 1971-72 assessment year: The assessee argued that no depreciation was actually allowed in the 1971-72 assessment year based on the return filed. However, the court held that the agreed order passed by the ITO, even if not strictly in line with the return, is binding. The court cited precedent to emphasize the correctness of the presiding officer's statement. The assessee's failure to challenge the order or seek rectification precluded them from disputing the allowed depreciation. The court rejected the request for a fresh decision or remand, affirming the decision in favor of the Revenue.

In conclusion, the court ruled in favor of the assessee regarding the interpretation of profits u/s 41(2) but upheld the decision in favor of the Revenue regarding the allowance of depreciation for the 1971-72 assessment year.