Strict construction of additional depreciation relief denied where new ships were not first used in the taxable business

Additional depreciation under section 10(2)(via) of the Indian Income-tax Act, 1922 was treated as a relief provision requiring strict construction. The benefit was held available only where new plant or machinery was installed for the first time in the business whose profits were assessed under the Act. Because the ships had already been brought into use in the assessee's general shipping business and were not part of the taxable computation when new, the statutory conditions were not met in the first year the allowance was claimed. The claim for additional depreciation was therefore disallowed.

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Issues: Whether the assessee-company was entitled to additional depreciation under section 10(2)(via) of the Indian Income-tax Act, 1922, in respect of the four ships.

Analysis: Additional depreciation under section 10(2)(via) was treated as a relief provision and, therefore, required strict construction. The allowance was held to be available only where the plant or machinery was new and was installed for the first time in the business whose profits were being assessed under the Indian Income-tax Act, 1922. The fact that the ships had earlier been brought into use in the assessee's general shipping business, but were not brought into the Indian taxable computation when new, meant that the statutory conditions were not satisfied in the very first year in which the allowance was claimed. It was further held that no relief under the Act could be granted in respect of a source of income unless that source was taken into account for assessment under the Act.

Conclusion: The assessee-company was not entitled to additional depreciation under section 10(2)(via) in respect of the four ships.

Final Conclusion: The reference was answered against the assessee, and the claimed additional depreciation was disallowed.

Ratio Decidendi: Additional depreciation under section 10(2)(via) is available only when the new asset satisfies the statutory conditions in the first year it enters the taxable business whose profits are assessed under the Act; if the source of income is outside the assessment base when the asset is new, the allowance cannot later be claimed.

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