1960 (4) TMI 72 - HC - Income Tax

Court allows depreciation allowance on inherited boats under Indian Income-tax Act section 10(5)

The court ruled in favor of the assessee, holding that they were entitled to depreciation allowance on inherited boats under section 10(5) of the Indian ... - Issues:- Entitlement to depreciation on inherited boats under section 10(5) of the Indian Income-tax Act.Analysis:The case involved a question referred to the court under section 66(1) of the Indian Income-tax Act regarding the entitlement of the assessee to depreciation on boats inherited from his late father. The Tribunal, in agreement with the Departmental Officers, had answered the question negatively based on the interpretation of the statutory expression 'actual cost to the assessee' in section 10(5) of the Act. The Tribunal did not delve into determining the quantum of depreciation allowance despite the absence of actual expenditure by the assessee in acquiring the inherited boats.In section 10(5) of the Act, clauses (a) and (b) define the written down value with reference to the 'actual cost to the assessee.' The court noted that section 10(5)(c) was inserted by the Amending Act of 1953, providing a further definition of the written down value for assets acquired by the assessee through gift or inheritance. The court emphasized that the amendment under section 10(5)(c) was not merely explanatory but provided for depreciation allowance for inherited assets. The court focused specifically on inheritance in this case.The court accepted the contention of the assessee's counsel, drawing on a previous decision by the Rangoon High Court, and declared the assessee entitled to the depreciation allowance, with the quantum to be ascertained later. The court discussed the evolution of the statutory expressions from 'original cost thereof to the assessee' to 'actual cost to the assessee' and found no substantial difference between them. The court also highlighted the limitation imposed by section 10(5)(c) on determining the written down value based on the predecessor's value or market value at the time of inheritance, which was not applicable to assessments in 1951-52.Additionally, the court referenced Lord Atkin's observations in a relevant case but emphasized that the determination should be based on the language of the Indian Income-tax Act. The court answered the question in the affirmative in favor of the assessee, indicating that the Tribunal would need to determine the quantum of depreciation allowance. The assessee was awarded costs for the reference, including counsel's fee.