Depreciation, loss set-off, and double-shift allowance: actual depreciation allowed, firm-level loss limits, and proportionate extra depreciation applied.

Written down value of depreciable assets was held to be their actual cost where no depreciation had in fact been allowed during the exempt period, because the scheme required deduction only of depreciation actually allowed and not merely allowable. A partner was not permitted to set off a share of loss from an agricultural concern assessed as an unregistered firm against personal income, since the statutory scheme confined that loss to the firm. For a seasonal factory working double shift, extra depreciation was not a flat 50% of normal depreciation; it had to follow the proportionate rule tied to normal working days. The depreciation issue was answered in favour of the assessee, while the set-off and double-shift claims failed.

---

---

Issues: (i) Whether the written down value of the sugar factory and the dairy farm plant and machinery was to be taken at original cost or after reducing depreciation that would have been allowable during the exempt period; (ii) Whether the assessee could set off its share of loss in the agricultural company against its own income; (iii) Whether a seasonal factory working double shift was entitled to a flat 50% extra depreciation for the second shift.

Issue (i): Whether the written down value of the sugar factory and the dairy farm plant and machinery was to be taken at original cost or after reducing depreciation that would have been allowable during the exempt period.

Analysis: The relevant provisions required reduction only of depreciation actually allowed, not depreciation merely allowable. As no assessment had been made before 17 December 1948 and no depreciation had in fact been allowed under the Rampur regime or under the Act for the exempt period, the assets could not be treated as having suffered any actual depreciation for that period.

Conclusion: The written down value was to be taken at the actual cost, and the question was answered in favour of the assessee.

Issue (ii): Whether the assessee could set off its share of loss in the agricultural company against its own income.

Analysis: The agricultural concern was assessed as an unregistered firm, and the partners were not separately assessed under the relevant provision for partner-wise assessment. In such a situation, the second proviso to section 24(1) confined the loss to set-off only against the income of the firm itself and not against the income of any partner.

Conclusion: The assessee was not entitled to set off its share of the agricultural company's loss against its own income, and the question was answered against the assessee.

Issue (iii): Whether a seasonal factory working double shift was entitled to a flat 50% extra depreciation for the second shift.

Analysis: Rule 8 and the accompanying statement treated extra allowance for double-shift working as proportionate to the normal working days taken as 300 for the year. The rule did not support a flat grant of 50% of normal depreciation merely because the factory worked two shifts during the season.

Conclusion: The assessee was not entitled to exactly 50% of the normal depreciation for the second shift, and the question was answered against the assessee.

Final Conclusion: The reference succeeded only on the depreciation-written-down-value issue, while the loss set-off claim and the double-shift depreciation claim failed.

Ratio Decidendi: For depreciation and written down value, only depreciation actually allowed can be deducted, and a firm's loss assessed in the hands of an unregistered firm cannot be set off in the partners' individual assessments when the statutory scheme confines the loss to the firm.

---