Depreciation on pre-1961 assets must follow the Income-tax Act, 1961 computation rules for later assessment years.

For assessment years after the commencement of the Income-tax Act, 1961, depreciation on assets acquired before 1-4-1961 is to be computed under the 1961 Act by reference to the written down value and actual cost under sections 43(1) and 43(6), not under the Indian Income-tax Act, 1922. The court treated the point as covered by its earlier decision and applied that precedent to hold that the post-1961 depreciation computation regime governs even for pre-1961 assets. The issue was therefore decided in favour of the Revenue and against the assessee.

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Issues: Whether, for assessment years after the commencement of the Income-tax Act, 1961, depreciation in respect of assets acquired before 1-4-1961 is to be computed with reference to the written down value and actual cost under the Income-tax Act, 1961, or under the Indian Income-tax Act, 1922.

Analysis: The question was treated as covered by the Court's earlier decision. It was held that the depreciation computation for any assessment year after the commencement of the Income-tax Act, 1961 must be made by reference to the written down value of the assets and their actual cost as determined under section 43(1) and section 43(6) of the Income-tax Act, 1961, even where the assets were acquired before 1-4-1961.

Conclusion: The issue was answered in favour of the Revenue and against the assessee.

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