Depreciation computation under the Income-tax Act requires year-wise reassessment of actual cost and written down value for earlier-acquired assets.

For depreciation under the Income-tax Act, 1961, actual cost and written down value must be computed year by year under the statutory formula, including assets acquired before the Act where no saving provision preserves the earlier basis. The definition of written down value requires the Assessing Officer to deduct depreciation actually allowed in prior years, and section 43(1) also permits reduction of cost by amounts met by others. The provision was treated as prospective in its operation because it governs future depreciation calculations, not reopening of past assessments. The language of the statute and the suggested anomalies did not justify confining recomputation to assets acquired in the relevant previous year.

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Issues: (i) Whether, for assessment year 1962-63 and later years, the actual cost and written down value of assets acquired in earlier years had to be recomputed under the Income-tax Act, 1961; (ii) whether such recomputation amounted to impermissible retrospective operation affecting vested rights; (iii) whether the language of the provision or alleged anomalies justified limiting the recomputation to assets acquired in the relevant previous year.

Issue (i): Whether, for assessment year 1962-63 and later years, the actual cost and written down value of assets acquired in earlier years had to be recomputed under the Income-tax Act, 1961.

Analysis: The definition of written down value in section 43(6) required the Assessing Officer, for every assessment year, to determine the actual cost of assets already acquired and then deduct the depreciation actually allowed in earlier years. The scheme of section 43(1) also required reduction of the cost by amounts met directly or indirectly by another person or authority. The provision was not confined to assets acquired during the relevant previous year.

Conclusion: Recalculation under the 1961 Act was required even for assets acquired in earlier years, and the contention of the assessees was rejected.

Issue (ii): Whether such recomputation amounted to impermissible retrospective operation affecting vested rights.

Analysis: The provision did not reopen past assessments; it only governed the basis on which depreciation was to be allowed for future years. The assessees had no vested right to continue depreciation on an earlier and higher figure of actual cost once the statutory formula changed. The effect was prospective in operation, though it drew part of its operation from earlier facts.

Conclusion: The provision was not impermissibly retrospective, and no vested right of the assessees was infringed.

Issue (iii): Whether the language of the provision or alleged anomalies justified limiting the recomputation to assets acquired in the relevant previous year.

Analysis: The words used in section 43(1) were held to be apt for determining actual cost year by year, and the expression "has been met" did not confine the provision to new assets only. The alleged anomalies, including negative written down value and difficulties under allied provisions, were rejected as not arising on a proper construction of the statute.

Conclusion: Neither the language of the provision nor the suggested anomalies warranted the assessees' restrictive interpretation.

Final Conclusion: The statutory formula under the 1961 Act applied to the computation of depreciation for the relevant years on assets acquired earlier as well, and the appeals failed.

Ratio Decidendi: For depreciation purposes, the actual cost and written down value of an asset must be determined for each assessment year under the statute then governing that year, even in respect of assets acquired before the enactment, unless the Act expressly preserves the earlier basis.

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