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TMI Blog1990 (5) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... hat no referable question of law arises out of the order of the Tribunal for the following reasons. 3. Before the Tribunal the objection was that the Commissioner (A) erred in law and against the facts of the case by sustaining an addition of Rs. 28,460 under section 41(2) on the sale of Truck No. 8198. Truck No. 8198 was purchased by the assessee in the previous year relevant for the assessment year 1974-75 for Rs. 43,000. The assessee not having maintained any books of account for any of the past years, the income from the truck was estimated for the years 1974-75 to 1980-81. The income so estimated from the truck ranged between Rs. 5,000 (Assessment year 1974-75) and Rs. 9,600 (Assessment year 1980-81). The assessee claimed no depreciation on this truck for any of the assessments. Nor did the ITO allow any depreciation as such for any of the assessment years. From these facts, the ITO assumed that the income assessed was the net income after allowing all expenses including depreciation. The Commissioner (A) also did so. Thus, when the assessee sold the truck for Rs. 32,000 in this year, the ITO calculated the balancing charge at Rs. 28,466. The Commissioner (A) rejected the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated31-7-1987of the Bench was prepared by the worthy Vice President, Western Zone, (Dr. S. Narayanan) as the learned Accountant Member, this order in the present reference application was prepared by the learned Accountant Member, Shri S.K. Chander, on27-7-1988. I have carefully perused the said order in the light of the asstt. order, the first appellate order and the Tribunal's order. My inability to agree with the conclusion arrived at by my learned brother is regretted. The learned Accountant Member has proposed that reference application should be dismissed. On the other hand, I am of the view that referable questions of law as suggested by the applicant, do indeed arise from the Tribunal's order as the finding was recorded by the Bench after following the ratio in the case of Karamat Khan 52 ITR 642 (All.)(sic). In view of the above I am of the view that mixed questions of law and fact do definitely arise and, therefore, reference is required to be made to the Hon'ble High Court for their valued opinion. 4. The draft statement is prepared as under :--- 5. Assessee in this case is an individual by status and derived income from supply of building material and also pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned AAC has grossly erred in law as much as against the fact of the case by sustaining the addition of Rs. 28,460 under the head of balancing charges in respect of sale of Truck No. 8198?" 8. The Bench after considering the facts in details and the rival submissions deleted the addition with the following observation : (Reproduce para 5 of the Tribunal's order) A copy of the Tribunal's order dated31-7-1987is marked as annexure 'C' and forms part of the statement of the case. 9. From the preceding paragraphs it is clear that referable mixed questions of law and fact do arise from the Tribunal's order and the same are, therefore, referred for the esteemed opinion of the Hon'ble Delhi High Court. ORDER US. 255(4) OF THE I.T. ACT, 1961. We have not been able to arrive at an agreed conclusion in the above matter and the file is, therefore, being placed before the Hon'ble President for further action for reference to a Third Member. The point of difference is as under : "Whether on the facts and in the circumstances of the case, no referable question of law arises out of the order of the Tribunal bearing ITA No. 4040/DEL/1985 dated21-7-1987as held by the Accountan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Tribunal bearing ITA No. 4040/DEL/1985 dated21-7-1987as held by the Accountant Member or a referance lies on the questions raised by the Revenue as suggested by the Judicial Member?" 3. I have heard today the learned Departmental Representative Shri D.C. Agarwal and the learned representative for the assessee Shri R.S. Singhvi. The learned Departmental Representative relied very strongly upon the following High Court decisions to press the view that the interpretation of the word "actually" as used in section 43(6) of the Income-tax Act, 1961, which was also interpreted by the Tribunal for its view, had been interpreted by those High Courts though variously : 1. Madeva Upendra Sinai v.UnionofIndia[1975] 98 ITR 209 (SC); 2. Kanshi Ram Wadhwa v. CIT [1982] 138 ITR 830/9 Taxman 79 (Punj. Har.); 3. CIT v. Dr. Kishanchand [1983] 144 ITR 1 (MP); 4. CIT v. East Asiatic Co. Ltd. [1983] 13 Taxman 20/[1984] 148 ITR 124 (Cal.); 5. Indian Bank Ltd. v. CIT [1985] 153 ITR 282/22 Taxman 479 (Mad.); 6. Hukumchand Mills Ltd. v. CIT [1986] 160 ITR 661 (Bom.). He submitted that since the expression "actually" had thus become the subject matter of judicial interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not disputed by the department in any manner, it could not now be said that a question of law would arise out of a fact found by the Tribunal in its order. He thus commended the view taken by the learned Accountant Member. He pointed out that all the cases relied upon by the learned Departmental Representative were on the interpretation of the order of the Income-tax Officer as to whether the depreciation was actually allowed or not allowed but did not refer to a case where the depreciation was categorically not allowed. Referring to the Supreme. Court decision in the case of Madeva Upendra Sinai on which reliance was placed by the learned Departmental Representative, the learned representative of the assessee advocated that in this case also the Supreme Court had pointed out that the expression 'depreciation actually allowed' used in section 43(6) of the Income-tax Act, 1961 means depreciation actually taken into account or granted or given effect to by the Income-tax Officer but not depreciation notionally allowed and that such a construction would contra-indicate a deeming construction of the word "allowed" it qualifies and was also the antithesis of the concept of actually all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale proceeds of the machinery or plant exceeds the written down value u/s. 43(6). Section 43(6) defines written down value as the actual cost of the assessee less the the depreciation actually allowed to him. Since no depreciation was actually allowed to the assessee at any time, the Tribunal held that there was no room to hold that depreciation was deemed to have been allowed. It therefore held that there was no balancing charge to be brought to tax u/s. 41(2) and deleted the addition. 6. These facts found by the Tribunal do go to show that no depreciation was ever claimed by the assessee or allowed by the department. In the absence of such a claim or allowance by the department, the question of bringing any profit u/s. 41(2) to tax for the notional allowance of depreciation does not arise. This is what was found by the Supreme Court in the case, of Madeva Upendra Sinai . This was a decision of the Full Bench of the Supreme Court of five judges, of whom one learned Judge dissented. The majority view expressed was: "(i) The key word in clause (b) of section 43(6) of the Income-tax Act, 1961, is "actually". It is the antithesis of that which is merely speculative, theoretical or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually allowed" meant actually allowed, i.e., expressly allowed and not even deemed to have been allowed or allowable. In the case before the Punjab and Haryana High Court in Kanshi Ram Wadhwa's case , on which a certain amount of emphasis was laid by the learned Departmental Representative, I find that that was a case where the assessee agreed before the Income-tax Officer in respect of the assessment year 1971-72 to compute the income after allowing a certain amount of depreciation and when in the subsequent year the question arose as to whether any depreciation was allowed or not, the High Court pointed out that the assessee having derived the benefit of an agreed order of assessment, could not contend that the Income-tax Officer did not allow any depreciation during the relevant previous year. It therefore upheld the finding of the Tribunal that depreciation was computed and allowed in the assessment year 1971-72. In arriving at this conclusion, thePunjaband Haryana High Court relied upon the decision of the Supreme Court in the case of Madeva Upendra Sinai. It is of the interest to note that in this case one of the questions referred to the Hon'ble High Court was: "(1) Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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