Written down value depreciation cannot be reduced by agricultural income tax depreciation for the relevant assessment year.

Depreciation on assets used for agricultural operations partly taxed under Rule 7A was to be computed on the written down value under Section 32(1) and Section 43(6) of the Income-tax Act, 1961. Only depreciation actually allowed under the Income-tax Act, 1961, the Income-tax Act, 1922, repealed enactments, or executive orders under the 1886 Act could be reduced under Section 43(6)(b); depreciation allowed under the Kerala Agricultural Income Tax Act, 1991 was not expressly covered. The later insertion of Explanation 7 to Section 43(6) from 1 April 2010 showed that the double-benefit issue was addressed prospectively, so the earlier assessment year could not be read differently. The assessee was entitled to compute depreciation without reducing the agricultural income tax depreciation.

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Issues: Whether, for the assessment year 2002-03, depreciation on assets used for agricultural operations brought to tax partly under Rule 7A could be computed on the original cost of the assets or had to be confined to the written down value after reducing depreciation allowed under the Kerala Agricultural Income Tax Act, 1991.

Analysis: The statutory scheme under Section 32(1) and Section 43(6) of the Income-tax Act, 1961 allows depreciation on the written down value of the assets. Clause (b) of Section 43(6) permits reduction only of depreciation actually allowed under the Income-tax Act, 1961, the Income-tax Act, 1922, repealed enactments, or executive orders under the 1886 Act. Depreciation allowed under the Kerala Agricultural Income Tax Act, 1991 was not expressly excluded. The Court held that the deeming provision had to be applied as enacted, and the later insertion of Explanation 7 to Section 43(6) with effect from 1.4.2010 showed that the legislature itself addressed the double-benefit issue prospectively. For the relevant assessment year, the Court could not supply a casus omissus or deny the statutory benefit.

Conclusion: Depreciation was to be computed by taking the written down value as the actual cost without reducing depreciation allowed under the Kerala Agricultural Income Tax Act, 1991, and the assessee succeeded.

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