Written down value must reflect statutory depreciation, even where no prior allowance was actually granted.

In computing written down value under section 10(5)(c), statutory depreciation applicable to machinery must be deducted from actual cost, even where the assessee had not previously been assessed to income-tax or actually allowed depreciation. The court held that the statutory phrase is "depreciation applicable", not "depreciation allowed", so the computation depends on the depreciation prescribed by the Act rather than on whether the assessee earlier obtained any tax benefit. The contention that written down value should remain at actual cost because no prior allowance had been made was rejected as inconsistent with the language of the provision.

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Issues: Whether, for computing written down value under section 10(5)(c), depreciation that was applicable under the Act had to be deducted from the actual cost of machinery even though the assessee had not previously been assessed to income-tax and had not actually been allowed depreciation.

Analysis: The expression used in section 10(5)(c) is "depreciation applicable" and not "depreciation allowed". The written down value for the relevant assessment year had therefore to be determined by deducting the depreciation prescribed by the Act from the actual cost, irrespective of whether the assessee had earlier obtained any tax benefit. The argument that no deduction could be made because the assessee was not previously assessed was rejected as contrary to the language of the provision.

Conclusion: The assessee was not entitled to insist that written down value should remain at actual cost without deduction for depreciation; the question was answered against the assessee.

Ratio Decidendi: In computing written down value under the Act, statutory depreciation applicable to the asset must be deducted from actual cost, even if no depreciation was previously allowed to the assessee.

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