Late return and nil depreciation rules: business loss carry-forward allowed, but rollers cost deduction was denied.

Late filing of the return did not defeat the assessee's entitlement to carry forward business loss, because the binding Supreme Court authority on delayed returns and loss carry-forward governed the issue and the claim was allowed. By contrast, the cost of rollers used in sugar works was not eligible for depreciation or immediate revenue deduction: the Schedule under rule 8 prescribed a nil rate for that item, and that rate applied even where the rollers were first installed as part of the machinery rather than as replacements. Revenue deduction was available only in the manner specifically permitted on replacement, so the rollers claim was rejected.

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Issues: (i) Whether the assessee was entitled to carry forward the business loss despite the return being filed after the period prescribed in the general notice. (ii) Whether the assessee was entitled to depreciation on the cost of rollers, or alternatively to treat that cost as revenue expenditure.

Issue (i): Whether the assessee was entitled to carry forward the business loss despite the return being filed after the period prescribed in the general notice.

Analysis: The question was concluded by the binding Supreme Court decision governing late-filed returns and carry forward of loss. In view of that authority, the return did not defeat the assessee's entitlement on the facts referred.

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

Issue (ii): Whether the assessee was entitled to depreciation on the cost of rollers, or alternatively to treat that cost as revenue expenditure.

Analysis: The Schedule under rule 8 treated rollers used in sugar works as a separate item carrying nil depreciation, with the cost of replacement allowable as revenue expenditure only at the replacement stage. The Court held that the language of the Schedule could not be restricted to rollers installed later as replacements, nor could notional depreciation be claimed merely because the rollers were first installed along with the machinery. The rollers were treated as part of the machinery, but one for which the prescribed rate was nil until replacement.

Conclusion: The claim for depreciation and for immediate revenue deduction of the cost of the rollers was rejected and the issue was answered against the assessee and in favour of the revenue.

Final Conclusion: The reference succeeded only on the first question, while the depreciation claim on rollers failed, leaving the assessee with only partial relief.

Ratio Decidendi: Where the Schedule prescribes a nil rate of depreciation for a specified item, no depreciation can be allowed merely because the item was installed for the first time as part of the machinery; the prescribed rate must be given effect to, and revenue deduction arises only in the manner specifically permitted by the Schedule.

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