Actual cost under the 1961 tax law applies to pre-Act assets, with earlier depreciation adjusted under the new scheme.

For assets acquired before the commencement of the Income-tax Act, 1961, the computation of written down value and actual cost for later assessment years was held to follow the 1961 Act's statutory scheme, including the definition of actual cost in section 43(1). Earlier depreciation already allowed had to be adjusted within that framework, and the argument that this produced impermissible retrospectivity was rejected. The Court also preferred a uniform interpretation of the all-India fiscal statute and did not depart from the consistent view taken by other High Courts. The reference was answered in favour of the revenue.

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Issues: Whether, for assets acquired before the commencement of the Income-tax Act, 1961, the written down value and actual cost were to be determined under the Indian Income-tax Act, 1922, or under the definition of actual cost in the Income-tax Act, 1961.

Analysis: The controversy turned on the interplay between the repealed 1922 Act and the new statutory definitions in the 1961 Act. The Court held that the computation for assessment years after the 1961 Act came into force had to be made in accordance with the new statutory scheme, and that the definition of actual cost in section 43(1) applied even to assets acquired earlier. The Court further accepted the view that depreciation actually allowed in earlier years had to be accounted for under the 1961 Act framework, and the contention that this produced an impermissible retrospective operation was rejected. The Court also declined to depart from the consistent view taken by other High Courts on the same statutory provisions, emphasising the importance of uniform interpretation of an all-India fiscal statute.

Conclusion: The written down value and actual cost were required to be computed under the Income-tax Act, 1961, and not under the Indian Income-tax Act, 1922; the question was answered in the negative and against the assessee.

Final Conclusion: The reference was answered in favour of the revenue, with the Tribunal's contrary view not sustained on the legal issue referred.

Ratio Decidendi: For assessment years governed by the Income-tax Act, 1961, the statutory definition of actual cost and the corresponding written down value provisions apply to assets acquired before the Act's commencement, and earlier depreciation must be adjusted under that scheme.

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