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TMI Blog1980 (9) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to appreciate this question to refer to certain facts. It appears that in the regular assessment, the ITO had allowed depreciation amounting to Rs. 64,57,633. This reference relates to the assessment for the assessment year 1962-63 for which the previous year ended on 31 St March 1962. Under s. 154 of the I.T. Act, 1961, the ITO had rectified the assessment order and reduced the depreciation to Rs. 62,02,200. Thus, he withdrew the depreciation allowable to the extent of Rs. 2,55,433. The details are in the order of the Appellate Tribunal. We are not concerned with all the items. We are only concerned with one item, viz., the rebate recoverable from the foreign supplier, which amounted to Rs. 41,309. The AAC had allowed this item in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company in respect of paper machinery No. 2. The facts in regard to the other paper units are the same and, therefore, we hold that the rebate received by the assessee-company should be treated as revenue receipt and depreciation on the written down value based on the full cost of the actual cost of the units should be allowed. It has been stated before us on behalf of the assessee-company, that the income-tax Officer has treated the amount of rebate as a revenue receipt and has fixed this year and has also disallowed depreciation. In view of the Tribunal's earlier order, there was no justification for reducing the depreciation and development rebate on account of the rebate received by the assessee-company. " The Tribunal noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference was made by the Division Bench to the observations of the Supreme Court in the case of Shanti Prasad Jain v. Directorate of Enforcement [1963] 33 Comp Cas 231 ; AIR 1962 SC 1764, where it was found that the payment actually made was a payment by way of compensation. Now, upon those facts, even in spite of coming into operation of the I.T. Act, 1961, by which the question involved in the assessment year must be guided, in our opinion, the Tribunal came to the right conclusion. We might incidentally refer to the language used in the Explanation to s. 10(5) of the Indian I.T. Act, 1922, which read as follows: " Explanation.-For the purposes of this sub-section, the expression ' actual cost ' means the actual cost of the assets to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght apply. But in this case what was 'paid was compensation for low output for the defective machinery supplied by the German firm and for this purpose the suppliers deposited certain money to a German bank for being utilised by the assessee-firm. There was no settlement or reduction of the cost of machinery already supplied to the assessee for which money had been paid. Furthermore, the amount which the assessee had received on account of low output had been treated as revenue receipt and had been taxed as such. In these circumstances, oil the construction of the section, we a-re of the opinion that in view of the ratio of the decision of this court referred to hereinbefore, the assessee is bound to succeed. Our attention, however, was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding. But, be that as it may, the question is whether non-action on the part of the Swiss suppliers and their omission to take any legal steps against the assessee-company for the recovery of the amount of Rs. 30,572 for a period of nearly five years would lead to the inference that there was a cessation of liability with effect from the date when the entry was made. The entry was made, as pointed out above, in the year 1960, that being the previous year for assessment year 1961-62 and, thereafter, the amount of Rs. 30,572 has been shown under the head ' Capital reserve not available for dividend', being capital profit of liabilities written back. Mr. Kaji may be right when he contends that at least according to the books of account of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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