Written down value computation includes initial depreciation when calculating sale profit under the proviso to section 10(2)(vii).

For computing written down value under the second proviso to section 10(2)(vii), initial depreciation that had in fact been allowed under the Act is to be deducted as part of the depreciation actually allowed. The exclusion of initial depreciation from written down value operates only for the allowance under section 10(2)(vi) and does not control the sale-profit computation under section 10(2)(vii). On that construction, the written down value must reflect all depreciation allowed under the Act, including initial depreciation, and the issue was answered against the assessee.

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Issues: Whether, for computing the written down value under the second proviso to section 10(2)(vii), initial depreciation is to be included.

Analysis: The written down value under section 10(5)(b) is the actual cost less all depreciation actually allowed under the Act. The exclusion of initial depreciation from the written down value for the purposes of section 10(2)(vi) operates only for that allowance provision and does not govern computation under the second proviso to section 10(2)(vii). Since initial depreciation had in fact been allowed under the Act, it forms part of the depreciation to be deducted while determining written down value for the sale-profit computation under section 10(2)(vii).

Conclusion: Initial depreciation is to be included in computing the written down value under the second proviso to section 10(2)(vii), and the question was answered in the affirmative, against the assessee.

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