9911796707
TMI Blog1974 (12) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... red in installing the connections irrespective of any contribution received from any consumer. Consequently, the amount paid by the consumers of such service lines could not be taken into account in calculating the actual cost. The assessments of the assessee-company up to the assessment year 1962-63 were made on that basis. Section 10(2)(vii) of the Indian Income-tax Act, 1922, provided that "depreciation would be allowed on the assets at such percentage of written down value thereof as may in any case or class of cases be prescribed". "Written down value" was defined in section 10(5) of the Indian Income-tax Act, 1922, after the amendment in 1953, as under: "(5) ....... 'written down value' means-- (a) in the case of assets acquired in the previous year, the actual cost to the assessee:...... (Provisos to this clause are omitted as they have no relevance) (b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Act, or any Act repealed thereby, or under executive orders issued when the Indian Income-tax Act, 1886 (II of 1886) was in force :........" (Provisos to this clause also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by that Act, or under any executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force....... (once again the proviso and the Explanation to the said section are omitted as being of no relevance)." The difference between section 10(5)(a) of the Indian income-tax Act, 1922, and section 43(1) of the Income-tax Act, 1961, is that under the Act of 1922 in assessing the actual cost only the contribution by Government or any other public or local authority had to be excluded while under the Act of 1961 the contribution received from any person had to be excluded. When the assessment for the year 1962-63 of the assessee came to be made by the Income-tax Officer, he found that the claim for depreciation made by the assessee included depreciation on the written down value of the service lines put into use in the assessment year 1961-62 as part of its record. The assessee had received Rs. 59,207 as and by way of contribution from the Government and local authorities. In the assessment of 1961-62 there was disallowance of proportionate depreciation on the sum of Rs. 59,207, as to that extent claim of the assessee had exceeded. In making the assessment for 1962-63 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn value' in sections 43(1) and 43(6) respectively of the Income-tax Act, 1961, even with reference to the assets in use in the previous year for the assessment year 1962-63 but which were acquired prior thereto ?" The question with which we are concerned in this reference is how will the actual cost be determined in respect of an asset which had been acquired by the assessee in any year prior to the previous year relevant for the assessment in question ? As mentioned hereinbefore, prior to the introduction of the 1961 Act "actual cost" had to be determined by deducting only the contribution made by the local authority and the Government, while under the present Act the contribution made by any other person including the consumer would have to be deducted in computing the actual cost. Good deal of arguments were advanced before the Tribunal as well as before us on the question whether the particular legislation was retrospective in effect and whether such retrospective effect could be given effect to in the scheme of the Income-tax Act and to the relevant section with which we are concerned. Counsel for the assessee contended that the concept of "actual cost" was inseparably conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that in the case of the asset acquired in the previous year, the actual cost to the assessee would be the actual cost as defined in section 43(1) of the Act. The question with which we are concerned is whether in the case of clause (b) where the written down value has to be determined in respect of an asset acquired before the previous year, the actual cost would be something different than the method followed in clause (a) of section 43(6). Section 43(6)(b) provides that in the case of an asset acquired before the previous year the written down value of the asset would be the actual cost to assessee less depreciation actually allowed to him under the 1961 Act or under the 1922 Act or under any other executive order issued under the Income-tax Act, 1886. It was argued by counsel for the assessee that actual cost in respect of this asset with which we are concerned had been determined in the previous year taking into consideration the definition prevalent at that time, namely, deducting from the cost the contributions made by a local authority or a Government but not deducting the contributions made by the consumers and thereafter depreciation had been allowed on such actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the Tribunal had relied also reiterated more or less the same principle, i.e., the decision in the case of Karnani Industrial Bank Ltd. v. Commissioner of Income-tax [1954] 25 ITR 558 (Cal). Counsel for the assessee contended before us that if actual cost in respect of an asset acquired prior to the relevant previous year had to be re-determined in the manner as contemplated by the 1961 Act the same would result not only in certain anomalies but would lead to absurdities and could not be given effect to. He argued first that it would result, as the Tribunal has observed, in having a negative written down value which was absurd and depreciation could not be calculated on the negative written down value. Written down value and depreciation are not used as having ordinary dictionary meaning but have certain statutory meanings. According to the provisions of the Act these expressions are used for certain purposes. In this case specially written down value is used for the purpose of calculating depreciation so long as the assessee is entitled to it. If after giving certain depreciation or calculating the written down value a figure is arrived at on which no depreciation could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as drawn to Halsbury's Laws of England, 3rd edition, volume 22, pages 796-797, Craies on Statute Law, 7th edition, pages 287, 291, Maxwell on the Interpretation of Statutes, 12th edition, page 215, Colquhoun (Surveyor of Taxes) v. Brooks [1889] 2 TC 490 (HL), Perry (H.M. Inspector of Taxes) v. Astor [1935] 19 TC 255, 283 (HL) and R. B. Jodha Mal Kuthiala v. Commissioner of Income-tax [1971] 82 ITR 570 (SC), on the question that in case of absurd result the court should lean against absurd construction and should also, if necessary, in order to give effect to the legislative intent, supply an omitted word. While we are in agreement with the propositions as advanced by learned counsel for the assessee, we are unable to accept the position that in this case any absurdity would result as indicated before or the legislative intent would be defeated if the plain meaning of the expression "actual cost" or "written down value" as contemplated by the 1961 Act be given effect to. The view we have taken is in consonance in our opinion with the principles enunciated in the case of Maharajah of Pithapuram v. Commissioner of Income-tax [1945] 13 ITR 221 (PC) and the decision of this court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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