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TMI Blog2013 (7) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation is allowed at a fixed percentage of the original cost year after year till the original cost is exhausted. Assessee has claimed the entire depreciation during the assessment year under consideration, which is not permissible as per the scheme of the depreciation - Though, the income was exempted under section 10 (29) of the Act, but it does not bar the assessee to claim the notional depreciation in its books of accounts - Even the income is exempted nonetheless, the balance-sheet etc. will have to be prepared as per law for each assessment year as per principle of accounting - Matter remanded to the AO to allow depreciation on various items of the assets by taking notional depreciation for the earlier years, but the depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Income Tax as per Section 10 (29) of the Act, but on 01.04.2003, the said exemption was withdrawn. So, for the assessment year under consideration, first time assessee has filed its return. In the return, the assessee had claimed the deduction on account of depreciation of "straight line method" at Rs.2,58,61,223/-. According to the A.O., the depreciation was allowable at the prescribed percentage of the actual cost of the assets in the year of acquisition and of the written down value (for short "WDV"). So, he has worked out the depreciation to Rs.22,07,08,617/- whereas the assessee has claimed the depreciation of Rs.25,98,40,226/-. Finally, the A.O. made the addition of Rs.3,91,31,609/-, which was upheld by the first appellate au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owable. He also submits that in this case, the assets owned by the assessee were used by the assessee for business purposes and the A.O. allowed the depreciation, as shown in the profit and loss account and balance sheet as now no exemption to the assessee was given under section 10 (29) of the Income Tax Act. He further submits that the A.O. has rightly disallowed the excess depreciation claimed for the earlier years and only the 'WDV' of the fixed assets as on 01.04.2002 was considered on the actual cost of the assets acquired during the previous years. So, no interference is required in the order passed by the A.O. as well as CIT (A). For this purpose, he relied on the ratio laid down in the cases of Commissioner of Income Tax vs. Mahend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(6): (6) "written down value" means- (a) in the case of assets acquired in the previous year, the actual cost to the assessee; (b) in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under this Act, or under the Indian Income- tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive orders issued when the Indian Income- tax Act, 1886 (2 of 1886 ), was in force. (c) ............" He also submits that the assessee has rightly claimed the depreciation as per the "straight line method". However, he admits that the depreciation will have to be allowed as per the rate prescribed in the schedule on various items of the assets. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Challapalli Sugar Ltd. vs. CIT (1975) 98 ITR 167 (SC). In the instant case, the dispute is that the assessee has claimed the depreciation on the "straight line method" by considering that it is the first opportunity to the assessee to claim the same. This the first year, where the assessee has filed the return. It may be mentioned that in the "straight line method", depreciation is allowed at a fixed percentage of the original cost year after year till the original cost is exhausted; that is to say, a constant sum of depreciation is allowed year after year. But, at the same time, as per the "written down value method", the depreciation is allowed at a fixed percentage not on the original cost, but on the written down value, na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained that the key word in clause (b) is 'actually'. It is the antithesis of that which is merely speculative, theoretical or imaginary. Thus, unless the depreciation has been 'actually' allowed in terms, it should not be taken into account for the purpose of Section 43 (6) of the Act. In the instant case, the assessee has claimed the entire depreciation during the assessment year under consideration, which is not permissible as per the scheme of the depreciation. The depreciation will have to be claimed on the basis of year to year. Though, the income was exempted under section 10 (29) of the Act, but it does not bar the assessee to claim the notional depreciation in its books of accounts. Even the income is exempted nonetheless, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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