Written down value means depreciation actually allowed, not merely allowable, where earlier years were exempt from tax.

For depreciation under section 10(2)(vi) read with section 10(5) of the Income-tax Act, 1922, written down value was held to mean cost reduced only by depreciation actually allowed under the tax law. Depreciation that was merely allowable, or carried in the assessee's books for commercial purposes, could not be deducted if no assessment had been made in earlier exempt years. On that basis, the original cost remained the written down value. The later 1962 Explanation to the Removal of Difficulties Order was not applied because the reference had to be answered on the law governing the Tribunal's order.

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Issues: Whether, for depreciation under section 10(2)(vi) read with section 10(5) of the Income-tax Act, 1922, the written down value of the assessee's assets had to be taken at the original cost or reduced by depreciation that had not in fact been allowed earlier because the assessee's income had been exempt from tax.

Analysis: The expression "written down value" in section 10(5)(b) requires deduction only of depreciation "actually allowed" under an income-tax law. Depreciation which was merely allowable, or which the assessee itself reflected in its books for commercial purposes, is not the same as depreciation actually allowed by an income-tax authority in assessment proceedings. Where the assessee had not been liable to assessment in earlier years because of exemption, no depreciation had been actually allowed in law, so nothing could be deducted from the original cost to compute written down value. The later 1962 amendment inserting an Explanation to the Removal of Difficulties Order could not be invoked in this reference because the Tribunal had not decided the case on that basis and the question referred had to be answered on the law governing the Tribunal's order.

Conclusion: The written down value was the original cost, and the assessee succeeded on the reference.

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