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of <h1>Court rules depreciation to be based on cost price, not lower amount, emphasizing actual depreciation.</h1> <h3>Commissioner of Income-Tax, Uttar Pradesh Versus Tireth Prakash</h3> Commissioner of Income-Tax, Uttar Pradesh Versus Tireth Prakash - [1971] 81 ITR 27 Issues:Calculation of depreciation on a motor truck for the assessment year 1962-63 based on the cost price of the truck.Analysis:The judgment pertains to a reference under section 256 of the Income-tax Act, 1961, involving the calculation of depreciation on a motor truck purchased by the assessee for Rs. 30,000 in May 1958. The Income-tax Officer estimated the net income from the truck at Rs. 2,000 for the assessment year 1962-63 and calculated the written down value at Rs. 13,360 with depreciation at 25%. The Appellate Assistant Commissioner did not accept the assessee's claim for depreciation based on the cost price of the truck, but the Appellate Tribunal ruled in favor of the assessee, allowing depreciation on the cost price of Rs. 30,000.The key question referred to the court was whether depreciation on the motor truck should be calculated on the cost price of Rs. 30,000 or the lower amount of Rs. 13,360. The interpretation of 'written down value' under section 43(6)(b) of the Act was crucial in determining the depreciation calculation. The court analyzed the provision and the requirement of actual depreciation allowed to the assessee in previous years under the Act or the Indian Income-tax Act, 1922.Referring to the decision in Vankadam Lakshminarayana v. Commissioner of Income-tax, the court emphasized that written down value necessitates actual depreciation allowed, not any notional allowance. Citing Commissioner of Income-tax v. Dharampur Leather Co. Ltd., the court reiterated that notional allowances are not considered in determining depreciation. The court found that no actual depreciation was allowed in the earlier assessment years, and notional allowances were considered. As a result, the written down value for the assessment year 1962-63 had to be accepted at the cost price of Rs. 30,000.In conclusion, the court ruled in favor of the assessee, directing the calculation of depreciation on the motor truck at Rs. 30,000. The Commissioner of Income-tax, U.P., was ordered to pay the assessee Rs. 200 as costs for the reference.
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