Depreciation computation and removal of difficulties order interpreted to favour the assessee on written down value.

For depreciation under the 1950-51 assessment, the written down value was to be computed by deducting only the depreciation actually allowed in earlier assessments, meaning depreciation that had actually entered into the computation of taxable income under the Indian Income-tax Act, 1922; the issue was answered in favour of the assessee. Paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, was held not to be attracted on the facts, as the matter was already governed by the binding construction in the assessee's own case; that issue was answered against the Revenue.

---

---

Issues: (i) Whether, for the assessment year 1950-51, depreciation was to be computed on the original cost as on January 1, 1949, and only the depreciation actually allowed in earlier assessments was to be deducted for arriving at the written down value. (ii) Whether paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, could be invoked on the facts, and whether it applied to the case.

Issue (i): Whether, for the assessment year 1950-51, depreciation was to be computed on the original cost as on January 1, 1949, and only the depreciation actually allowed in earlier assessments was to be deducted for arriving at the written down value.

Analysis: The answer to this question was governed by the earlier Supreme Court decision in the assessee's own case. The relevant principle was that, for the purpose of depreciation calculations, only the depreciation that had actually entered into the computation of taxable income under the Indian Income-tax Act, 1922, for the earlier assessment years could be treated as depreciation actually allowed.

Conclusion: The question was answered in favour of the assessee.

Issue (ii): Whether paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, could be invoked on the facts, and whether it applied to the case.

Analysis: The parties agreed that this question stood concluded by the court's earlier decision in a connected reference. On that basis, the provisions of paragraph 2 were not attracted in the manner suggested by the Revenue.

Conclusion: The question was answered in the negative and against the Revenue.

Final Conclusion: The reference was substantially answered in favour of the assessee, and the court declined to answer the fourth question at the assessee's request.

Ratio Decidendi: For depreciation purposes, only depreciation actually taken into account in computing taxable income under the earlier income-tax assessment can be treated as depreciation actually allowed, and paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, cannot be invoked contrary to the binding construction already placed upon it in the assessee's case.

---