9911796707
TMI Blog2013 (7) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of this Court has admitted the instant appeal on the following substantial question of law:- "The Tribunal while interpreting Section 10 of Income Tax Act 1961 was wrong in recording finding that persons exempted under Section 10 of the Act are not required to computate its total income in accordance with the provisions of the Act, which may include the computation of depreciation on written down value and not in any other manner?" The brief facts of the case are that the assessee is a statutory public undertaking of the State Government, which was constituted under the Warehousing Corporation Act, 1962. It derived income from storage fees, handling and transportation services, processing charges etc. Till the assessment year i.e. u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income". He submits that this provision is applicable with effect from 01.04.2002 but it does not mean that it change the scope of provisions after that date. It had the effect of laying down the intention of the legislature that the depreciation was an essential charge on the income of the assessee arising from the wear and tear of the assets in the course of the use thereof for the purpose of business and should be allowed mandatory in all cases. According to learned counsel, in the instant case, the assessee does not derive any strength from the proposition that the depreciation was optional o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a 'fiction', it is a fact. The deduction has been envisaged in the Income Tax Act in appreciation of the Act that, in course of the business, the fixed assets suffer wear and tear, which is a cost to the business and must be quantified and deducted before computing the profits of the business. Deduction is a charge on the profits of the business. He further submits that the assessment year under consideration is the first year where the assessee has filed return and offer its income for the purposes of Tax. Prior to it, the entire income of the assessee was exempted as per Section 10 (29) of the Act. So, the depreciation is not actually allowed/claimed to the assessee. For this purpose, he read out Section 43 (6) of the Act, which d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he asset decreases every year, being a percentage of the written down value which in the first year is the actual cost and in succeeding years, the actual cost less all depreciation actually allowed under the Income Tax Act or any Act repealed thereby. Thus, depreciation allowance is in respect of such assets as are used in the business and is to be calculated on the written down value, i.e. in the case of assets acquired in the previous year, the actual cost of the assets and, in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under the Act. For this purpose, expenses, relating to installation and even interest on borrowed capital for acquiring plant and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matically, ensures that the aggregate allowances would never exceed the permissible hundred per cent. The "written down value method" being simpler and easier to follow had been adopted in respect of depreciable assets except ocean-going ships. In Madeva Upendra Sinai vs. Union of India, (1975) 98 ITR 209 (SC), the Hon'ble Apex Court explained that the pivot of the definition of written down value is the actual cost of the assets. Where the asset was acquired and also used for the purpose of business in the previous year, such value would be its full actual cost and depreciation for that year would be allowed at the prescribed rate on such cost. In the subsequent year, depreciation would be calculated on the basis of actual cost less depre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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