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TMI Blog2001 (7) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... year under appeal, assessee claimed that he has sold the car for an amount of Rs. 50,000. But, no capital gains was offered for tax. The Assessing Officer observed that the car was purchased in April 1990 for an amount of Rs. 20,000, and the assessee had been returning the income from both kirana shop and plying of car on hire, on estimate basis, and so there was an effetive allowance of depreciation on the car in the relevant years, and so the capital gains has to be computed under the head 'short-term capital gains' in terms of section 50 of the Act. He accordingly computed the capital gains at Rs. 42,800, with the following remarks - 'Though the assessee has purchased the car in April, 1990 for a sum of Rs. 20,000, the assessee has not shown the income from put-chase and sale of kirana and car hire charges separately. Even for the assessment year 1993-94, the assessee has estimated his net income from both the sources Le., purchase and sale of kirana goods as well as running a car on hire. Net income means, the income after deducting all the expenses allowable under section 30 to 43D. As the assessee has estimated his net income by way of purchase and sale of Kirana and other g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; ---------- W.D.V. as on 1-4-1993 Rs. 7,200 Sale value in March, 1993 Rs. 50,000 ---------- Net short-term capital gains &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits by invoking the proviso to section 13 of the Indian Income-tax Act, 1922. The course generally followed in such cases was to estimate the net income. The decision of the appellate authorities in such cases was that the mere fact that net profits had been estimated could not be a ground for saying that depreciation claimed in the returns had been duly 'allowed' as provided under the Act. On the contrary, they held that since no depreciation was actually allowed in the past years the profit or loss under section 10(2)(vii) would be computed without making any deduction for depreciation for arriving at the WDV of the asset. The Board consider that where it is proposed to estimate the profit and the prescribed particulars have been furnished by the assessee, the depreciation allowance should be separately worked out. In all such cases, the gross profit should be estimated and the deductions and allowances including the depreciation allowance should be separately deducted from the gross profit. If it is considered that the net profit should be estimated it should be estimated subject to the allowance for depreciation and the depreciation allowance should be deducted therefrom. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer and claimed that the assessee returned only net profit for both the kirana shop and the car hire, and when net profit is returned, it must be presumed that it was only clear of depreciation on the car. In other words, the claim is that if the assessee returned the net profit without claiming depreciation on the car, it should have specifically mentioned in the return or in the accompanying statement, and as the assessee did not make any such mention anywhere, it has to be necessarily presumed that the assessee returned the income, after taking into account the depreciation allowable under section 32 of the Act. 8. Having regard to rival submissions, I am of the view that the assessee deserves to succeed. I have asked for statement of computation of income filed by the assessee for the assessment year 1993-94. It read as under : "Computation of Income Business: Net income estimated by way of purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted the return and did not clarify at all in the assessment order, as to whether the income determined was after the grant of depreciation on car or before. In the absence of any clarification by the Assessing Officer, the question is whether it can be presumed that the assessee returned the income of Rs. 28,100 for the assessment year 1993-94 and similar amounts for the earlier years, after claiming depreciation. I am of the view that there can be no such presumption in law to the disadvantage of the assessee. The assessee clearly has an option of either claiming the depreciation or not claiming the depreciation, during the relevant year, in the light of the decision of the Apex Court in the case of CIT v. Mahendra Mills [2000] 243 ITR 56. In that case, the Apex Court took the view that depreciation cannot be thrust upon the assessee. The assessee had the option of either claiming it or postponing the claim to a subsequent year. The Hon'ble Supreme Court in that case observed as under - 'We get support from the earlier decision of this Court in CIT v. Dharam pur Leather Co. Ltd [1966] 60 ITR 165. Allowance of depreciation is calculated on the written down value of the assets, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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