Depreciation on inherited assets allowed where "actual cost" was taken as value at acquisition for the relevant assessment year.

Depreciation on inherited boats was allowed under section 10(5) of the Indian Income-tax Act, 1922, because "actual cost to the assessee" for property acquired otherwise than by purchase was treated as its value at the time of acquisition. The later insertion of section 10(5)(c), which expressly dealt with gifts and inheritance, was held not to control the 1951-52 assessment year. The amendment therefore did not bar depreciation on inherited assets for that year, although the quantum of depreciation still had to be determined.

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Issues: Whether the assessee was entitled to depreciation on boats inherited from his father for the assessment year 1951-52, having regard to the expression "actual cost to the assessee" in section 10(5) of the Indian Income-tax Act, 1922.

Analysis: The expression "actual cost to the assessee" was construed in the light of earlier authority holding that where property is acquired otherwise than by purchase, its cost to the assessee is its value at the time of acquisition. The later insertion of section 10(5)(c), which expressly dealt with assets acquired by gift or inheritance, was held not to govern assessments for 1951-52. The Court held that the amendment did not exclude depreciation for inherited assets for the earlier assessment year, and that the quantum of depreciation still remained to be ascertained.

Conclusion: The assessee was entitled to depreciation on the inherited boats, and the question was answered in the affirmative, in favour of the assessee.

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