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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether, for computing the profit under the second proviso to section 10(2)(vii), the written down value of a partly business-used asset must be reduced by depreciation actually allowed or by depreciation merely allowable.
Analysis: Written down value under section 10(5)(b) is the actual cost less depreciation actually allowed, and not depreciation notionally allowable. Section 10(3) only restricts the amount of depreciation admissible where an asset is not wholly used for business; it does not alter the statutory meaning of written down value. The provision taxing excess sale proceeds under the second proviso to section 10(2)(vii) operates by reference to that defined written down value, and the whole asset cannot be split into hypothetical business and non-business parts for fixing original cost.
Conclusion: The profit had to be computed by deducting depreciation actually allowed, not depreciation merely allowable. The question was answered in favour of the assessee.
Ratio Decidendi: For purposes of section 10(2)(vii), second proviso, read with section 10(5)(b), written down value must be computed by deducting only depreciation actually allowed, and section 10(3) does not permit substitution of notional depreciation or artificial splitting of the asset's original cost.
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