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TMI Blog1957 (9) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... asset ? 2. One would have thought that as a mere matter of common sense and accountancy, no depreciation can exceed the original cost to the assessee of the depreciable asset, and the question, therefore, would be capable of an easy answer; but Mr. Mehta, appearing for the assessee in this case, has put forward before us a rather ingenious argument to induce us to hold that under the provisions of the Income Tax Act depreciation allowances are admissible even if the result of such allowances is that the total depreciation allowance in respect of an asset exceeds its original cost. Now, the relevant proviso with which we are primarily concerned is proviso (c) to section 10(2)(vi) and the proviso is in these terms : the aggregate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1939; but before that date depreciation was allowed on the actual cost to the assessee, that is, his original cost and not on the written down value. But in enacting that from 1939 the depreciation will be allowed on the written down value, the Legislature constituted one exception and that exception is where the assets are ships which do not ordinarily ply on inland waters, that is, ocean-going ships. In respect of these ships, normal depreciation is to be calculated on the basis of the original cost; and the first branch of the argument of Mr. Mehta is that proviso (c) has reference only to ocean-going ships, in the case of which depreciation is to be calculated on the original cost and not on the written down value. Now, so far as thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 2 of that clause a provision is made for initial depreciation. This applied in the case of buildings that have been newly erected or machinery and plant that has been newly installed after the 31st of March, 1945, and this initial depreciation is in addition to all other depreciation. However, in providing for this depreciation, the Legislature specifically provided in this paragraph which shall however not be deductible in determining the written down value for the purposes of this clause. Therefore, in order to ascertain written down value, for the purpose of calculating the normal depreciation, initial depreciation is not to be taken into account. The normal rule for calculating written down value is to be found in section 10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial depreciation and 7.2 percent. total depreciation during the year, the excess thus being 3.2 per cent, Now, Mr. Mehta's contention is that for the purposes of proviso (c) - and this is the second branch of the argument - although the proviso talks of the aggregate of all allowances, initial depreciation allowance should not be treated as depreciation allowance at all. The reason he gives for adopting such a course is that initial depreciation is not to be taken into account in determining the written down value. If proviso (c) had anything to do with written down value, this argument might have had some substance in it; but proviso (c) in terms speaks of the original cost to the assessee and not of any written down value, and there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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