9911796707
TMI Blog1979 (12) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of section 32(1)(iii) are met when the assessee showed the sale proceeds in their books, is sustainable in law (and on the materials on record) ? " The assessee is a firm assessed for the assessment year 1969-70. The relevant previous year ended on 4th September, 1968. Among the machinery used by the assessee, there was a sizing machine the written down value of which was Rs. 40,526 at the beginning of the year. This machine was sold during the year for a sum of Rs. 29,500 resulting in a loss of Rs. 11,026, if the written down value is the criterion. The book value of the machinery was Rs. 39,495. The machinery account was credited with the sale proceeds. The difference between the book value and the realised price was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s actually reflected when the books showed that the machinery worth Rs. 39,459 was sold for Rs. 29,500. The Tribunal, therefore, confirmed the order of the AAC and thus the matter is now before us under reference at the instance of the Commissioner of Income-tax. Section 32(1)(iii) is the relevant provision and it runs as follows: " In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed-... (iii) in the case of any building, machinery, plant or furniture which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off in the books. In other words, in the cases of discarding, demolition or destruction, it would be necessary for the assessee to show specifically in the books that the machinery is no longer there by making appropriate entries as deficiency or loss. When it comes to the question of sale, there is a kind of automatic accounting. By crediting the sale proceeds, the assessee would be showing the surplus or deficiency reflecting the difference between the book value and the sale value. It is necessary to examine whether the proviso imposed a condition precedent, as contended by the learned counsel for the Commissioner. In s. 34, for instance, in respect of development rebate or depreciation, the conditions for such allowance are set out. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of the assessee. The writing-off was considered to be necessary only to show the maximum up to which alone the assessee could claim a deduction. There were also cases where this was not treated to be a condition precedent. In order to get over this position, Parliament in s. 36(2) made special provision for writing off the irrecoverable amount in that particular year, in which the claim was made. However, in s. 32(1)(iii), the proviso does not mention that the amount should be written off in that particular previous year. It cannot be assumed that the absence of the expression " for that previous year " in s. 36(2) is without significance and has to be ignored. In the context of the language of the proviso, as it is in s. 32(1)(iii), i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be refused. The position cannot be different in the present case. A similar question was considered by the Bombay High Court in CIT v. London Hotel [1968] 68 ITR 62. In that case, the firm was running hotel in its own premises. The three partners of the firm purchased the said premises at the time of dissolution of the firm. The firm claimed deduction of the loss that arose on account of such a sale. The claim of the assessee was resisted on the ground that the amount had not been actually written off in the books of the assessee. It was also contended in that case that the proviso to s. 10(2)(vii), which corresponds to s. 32(1)(iii), required as condition precedent a write-off in the books. This contention was raised on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepting the view that even in the absence of writing off in the books, the assessee would be eligible for the allowance. What is necessary is that there must be substantial compliance with the provisions of the Act and in this case there is such a compliance by the assessee, as already indicated. The learned counsel for the Commissioner drew our attention to the decision in Western States Trading Co. P. Ltd. v. CIT [1971] 80 ITR 21 (SC) and also to a passage in the first volume of Sampath Ivengar's Law of Income-tax, 6th Edn. The Supreme Court, in the decision mentioned above([1961] 41 ITR 225), merely points out that there are four conditions to be satisfied before the allowance could be claimed, one of the conditions being set out in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
