Depreciation actually allowed governs section 41(2) profit computation where no depreciation was claimed in returns.

For computing profit under section 41(2), only depreciation actually allowed in earlier assessments is relevant where the returns were processed under section 143(1) and no depreciation was claimed in those returns. On that factual basis, the computation could not proceed on an assumed depreciation allowance, so the assessee's contention was accepted and the deletion by the Appellate Assistant Commissioner was upheld.

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Issues: Whether, for computing profit under section 41(2), only the depreciation actually allowed in the earlier assessments was to be taken into account where the returns had been processed under section 143(1) without any claim for depreciation.

Analysis: The assessments for the relevant years had been completed under section 143(1) on the basis of the returns filed by the assessee, and the Revenue did not controvert that no depreciation had been claimed in those returns. On that footing, the computation of profit under section 41(2) had to be made with reference to the depreciation actually allowed, and not on an assumed basis.

Conclusion: The assessee's contention was accepted, the deletion made by the Appellate Assistant Commissioner was upheld, and the Department's challenge failed.

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