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TMI Blog1961 (7) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... by the department. For the succeeding year 1954-55, the account year being the calendar year 1953, the assessee purported to write off a sum of ₹ 1,21,245 as depreciation in respect of the buildings, the air conditioning plant, lifts, transformers and internal telephones. The Income-tax Officer disallowed four-fifths of the depreciation claimed on the ground that only a fifth part of the building was utilised for the business of the assessee. On appeal, the Appellate Assistant Commissioner disagreed with the view taken by the Income-tax Officer that any part of the depreciation was allowable. He held that the depreciation allowance in the case of a business of insurance must be limited to the actual and real depreciation and that as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermination of a sort of notional or artificial income based upon the rules laid down in the Schedule. The principal point to be noticed in this connection is accordingly that except to the extent to which the rules in the Schedule provide, an assessee is not entitled to the benefit of such allowances or deductions as are contemplated in section 10 or any of the other sections which have been excluded. The assessee in the present case carries on a business of general insurance. The particular rule of the Schedule applicable to this case is rule 6 which reads thus: The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts ..after a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o do so. The same rule further lays down: Profits and losses on the realisation of investments and depreciation and appreciation of the value of the investments shall be dealt with as provided in rule 3 for the business of life insurance. Turning to rule 3, sub-rule (a) of that rule relates only to a business of life insurance. It is common ground that rule 3(b) applies both to a business carrying on life insurance and to a business carrying on general insurance, This rule lays down: Any amount either written off or reserved in the accounts...to meet depreciation of or loss on the realisation of securities or other assets, shall be allowed as a deduction, and any sums taken credit for in the accounts ... on account of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation . The expression to meet seems to us to be very significant and to indicate that the provision either by reservation or by writing off should cover the actual depreciation; it is not the intention of the rule that any amount unrelated to the depreciation could notionally be written off or reserved. Before we refer to the authorities on this aspect of the matter, we may deal with the argument that any writing off or reservation in the accounts contemplated by this rule cannot be interfered with by the department. The rule, it is argued, requires that such writing off or reservation in the accounts shall be allowed as a deduction . It is claimed that here is a mandatory provision. The argument further proceeds that by reason of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by section 10 of the Act. It is clear then that in computing profits and gains, the Income-tax Officer has the power to examine the quantum of depreciation either written off or reserved and satisfy himself that that does not exceed the amount allowable to meet the depreciation. In Western India Life Insurance Co. Ltd., In re, [1938] 6 ITR 44 the interpretation of rule 30 which was almost of the same scope as rule 3( b) came for consideration. That rule provided: Any amount either written off in the accounts or through the actuarial valuation balance-sheet to meet depreciation, or loss on securities or other assets, or which is carried to a reserve fund formed for that sole purpose and not used for any other purpose, may be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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