1992 (4) TMI 87 - AT - Income Tax

Actually Allowed, Carry Forward, Income From Other Sources, Mistake Apparent From Record, Res Judicata, Written Down Value

Summary

Issues Involved:
1. Correctness of the terminal allowance allowed for the assessment year 1985-86.
2. Treatment of depreciation not actually allowed for the assessment year 1976-77.
3. Rectification of the assessment order under section 154.

Issue-Wise Detailed Analysis:

1. Correctness of the Terminal Allowance Allowed for the Assessment Year 1985-86:
The primary issue in the appeal pertains to whether the terminal allowance for the assessment year 1985-86 was correctly determined. The Income-tax Officer (ITO) had calculated the terminal allowance under section 32(1)(iii) at Rs. 1,18,529, which was derived by subtracting the sale value of the plant and machinery (Rs. 85,000) from the closing written down value (WDV) of Rs. 2,03,529. However, the assessee contended that the correct terminal allowance should be Rs. 1,65,808, based on an opening WDV of Rs. 2,50,808. The discrepancy arose from the treatment of depreciation not actually allowed for the assessment year 1976-77.

2. Treatment of Depreciation Not Actually Allowed for the Assessment Year 1976-77:
The assessee argued that the depreciation of Rs. 47,280 for the assessment year 1976-77 should not be included in the WDV calculation as it was not "actually allowed." The ITO had refused to carry forward this depreciation, stating that the assessee had no business income that year, and the loss was determined under "Income from other sources." The assessee provided evidence, including assessment and rectificatory orders, to support that the depreciation was not carried forward. The Tribunal referenced the Supreme Court's decision in Maharana Mills (P.) Ltd. v. ITO, which clarified that "actually allowed" means depreciation that has been granted and given effect to, not merely notionally allowed. Therefore, the depreciation of Rs. 47,280 should not be considered in the WDV calculation.

3. Rectification of the Assessment Order Under Section 154:
The assessee filed an application under section 154 to rectify the assessment order dated 16-6-1986, claiming an apparent mistake on record regarding the terminal allowance. The ITO rejected this application, arguing that the issue pertained to the assessment year 1976-77 and suggested that the assessee should seek rectification for that year instead. The CIT(Appeals) upheld the ITO's decision. However, the Tribunal found that the mistake regarding the non-carry forward of depreciation was apparent and could be rectified in the current assessment year while determining the terminal allowance. The Tribunal emphasized that the earlier finding did not operate as res judicata and could be corrected.

Conclusion:
The Tribunal concluded that the assessee's contentions were correct under the law. The depreciation of Rs. 47,280 for the assessment year 1976-77 was not "actually allowed" and should not be included in the WDV calculation for determining the terminal allowance. The Tribunal allowed the appeal, setting aside the orders of the lower authorities and granting the enhancement of the terminal allowance by Rs. 47,280.