Depreciation valuation can be re-examined where sale deed figures do not reflect the true cost of assets.

In computing depreciation, the income-tax authority may go behind the conveyance and examine whether the stated asset values reflect the true cost. Documentary recitals in a sale deed are not conclusive where surrounding circumstances indicate that the declared price is not real. On the facts, the authority could inspect the vendor's accounts, written down values, the lack of reliable evidence for the machinery valuation, and the nature of the transaction, and could treat part of the consideration as goodwill while reappraising the machinery value. The authority was therefore competent to fix its own valuation, and the issue was answered in favour of the Revenue.

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Issues: Whether the income-tax authorities were competent, in computing depreciation, to go behind the conveyance and determine the true cost of the assets notwithstanding the price allocations stated in the sale deed.

Analysis: The assessee claimed that the figures stated in the conveyance were conclusive and that, in the absence of the proviso relied on by the department, the Income-tax Officer could not substitute a notional value. The Court held that the original cost of an asset is a question of fact and that documentary recitals do not bind the taxing authority where the surrounding circumstances show that the stated price is not real. On the materials, the authorities were entitled to examine the vendor's accounts, the written down values, the absence of reliable evidence for the claimed machinery valuation, and the nature of the transaction, and to conclude that part of the consideration represented goodwill and that the machinery value required reappraisal.

Conclusion: The Income-tax Officer was competent to go behind the conveyance and fix his own valuation on the facts of the case, and the question was answered in the affirmative, in favour of the Revenue.

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