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Issues involved: Interpretation of provisions of the Indian Income-tax Act, 1961 regarding actual cost and written down value for assets acquired before the Act came into operation.
Summary: The High Court of Bombay considered a reference made by the Commissioner under s. 256(1) of the Income-tax Act, 1961, regarding the calculation of written down value of assets for the assessment year 1965-66. The dispute arose when the Income Tax Officer (ITO) recalculated the written down value of assets based on the new provisions of the 1961 Act, leading to negative figures in some cases. The Assistant Commissioner (AAC) held that depreciation should cease on assets with negative values but disagreed with further adjustments. The Tribunal, however, supported the assessee's contention that the new definition of "actual cost" should not apply retrospectively to assets acquired before the new Act. The Tribunal's decision was challenged, citing conflicting decisions from other High Courts. The Calcutta, Madras, and Allahabad High Courts had previously ruled that actual cost must be computed according to the provisions of the 1961 Act for assessments after its implementation. They emphasized that each year's assessment is self-contained and must adhere to the statutory definitions of "actual cost" and "written down value." The courts rejected arguments of anomalies arising from negative values, stating that such values indicated fully depreciated assets. The Bombay High Court, after reviewing these decisions, found no reason to depart from the principle of uniform interpretation and ruled in favor of the revenue. The Court noted that the Tribunal had not addressed all aspects of the appeal against the AAC's order, indicating that these aspects would be considered upon receipt of the judgment. Ultimately, the Court answered the reference question in the negative, in favor of the revenue, with each party bearing their own costs.
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