TaxTMI 
TaxTMI 
2006 (4) TMI 243
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....the facts and circumstances of the case, these assets are plant and so depreciation, as claimed for plant and machineries, needs to be allowed." 3. Rival contentions have been heard and record perused. The facts in brief are that the assessee Kandla Port Trust is a Major Port under the Major Ports Trust Act, 1963. It is having status of Local Authority. The income of the Port Trust was exempted under section 10(20) of the Income-tax Act till 31-3-2002. By virtue of amendment under section 10(20) of the Income-tax Act, 1961 in the Finance Bill, 2002, in income of Port Trust has become taxable for the first time with effect from 1-4-2002. In view of the amendment, Kandla Port Trust has filed its first return for the assessment year 2003-04. Prior to it, to claim refund of TDS, return was filed for assessment year 1998-99 showing 'nil' income. Kandla Port Trust has never provided depreciation in the books as per Income-tax Act or Rules. Since there was no assessment of income, there was no question that any depreciation being actually allowed to it, and hence opening WDV as on 1-4-2002 was taken as the original cost to the port. 4. The assessee filed the first ever return of....
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....(A), the assessee is in further appeal before us. 6. It was contended by the learned Senior A.R., Mr. J.P. Shah, that Kandla Port Trust was exempted till the assessment year 2002-03 under the Income-tax Act, 1961 and has been made liable to tax from the assessment year 2003-04, therefore, the question of claiming depreciation under the said Act has arisen for the first time in the assessment year 2003-04. He further submitted that like other concern running the business to arrive at its book profit, it has provided depreciation in its books of account up to assessment year 2002-03, but the fact of the matter is that as there is no computation of income and its assessment under I.T. Act, up to the assessment year 2002-03, there has been no question of allowing depreciation under the said Act. 7. He further drawn our attention to the definition of depreciation as contained under section 32(1)(ii) read with section 43(6)(b) of the Income-tax Act which defines written down value and submitted that only depreciation "actually allowed" has to be considered for working out the written down value on which the claim of depreciation has to be allowed. He also relied on various judicial pro....
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....t, sub-clause (a) of section 43(6) speaks of the determination of cost where assets are acquired in the previous year concerned. In that case, the actual cost of the assessee shall be the written down value. Secondly, sub-clause (b) of section 43(6) states that the written down value of any asset acquired before the previous year shall be actual cost of the asset less depreciation actually allowed in resect of that asset under the 1961 Act or under Indian Income-tax Act, 1922 or any other law prevailing before coming into force of that Act where the depreciation allowed shall not include depreciation allowed under the Act of 1922 which were not deductible in determining the written down value. It may be noted that the clause (b) of section 43(6) clearly speaks of depreciation actually allowed and not the depreciation allowable. Thirdly, sub-clause (c) provides for determination of written down value in case of any block of assets. In the instant case we are concerned with sub-clause (b) of section 43(6). It is pertinent to mention here that the key word in clause (b) of section 43(6) is "actually". It is the antithesis of that which is merely speculative, theoretical or imaginary. ....
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....anguage which is otherwise unambiguous. If the intendment is not in the words, it is nowhere else. The need for interpretation arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the Legislature. When words acquired a particular meaning or sense because of their authoritative construction by superior courts, they are presumed to have been used in the same sense when used in a subsequent legislation in the same or similar context. It is settled law that the expressions used in a taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative intention. In Raja Jagdambika Pratap Narain Singh v. CBDT [1975] 100 ITR 698, Supreme Court held that "equity and income-tax have been described as strangers". The Act, in the very nature of things, cannot be absolutely case upon logic. It is to be read and understood according to its language. If a plain reading of the language compels the court may have to adopt it, vide H.H Prince Azam Jha Bahadur v. Expenditure-tax Officer [1972] 83 ITR 92 (SC). Logic alone with not be determinative of a controversy....
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....ified in adding words thereto so as to make out some presumed object of the Legislature. If the Legislature has failed to clarify its meaning by the use of appropriate language, the benefit thereof must go to the taxpayer. It is settled law that in case of doubt, that interpretation of a taxing statute which is beneficial to the taxpayer must be adopted. In view of the above discussion we are inclined to agree with Mr. Shah that the words used in section 43(6) to the effect that while arriving at written down value of any asset acquired before the previous year shall be the actual cost of the asset less depreciation actually allowed in respect of that asset under the Income-tax Act and not the depreciation allowable. 13. Hon'ble Supreme Court in Madeva Upendra Sinai v. Union of India [1975] 98 ITR 209 observed that the scheme of the 1922 Act is that depreciation is allowed, year after year, on the actual cost of the assets as reduced by the depreciation actually allowed in earlier years. It follows, therefore, that even in the case of assets acquired before the previous year, where in the past, no depreciation was computed, actually allowed or carried forward, for no fault of....
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....Act. Thus mere passing of accounting entry made for depreciation in the books of account was not the depreciation actually allowed, as there was no liability to tax and as there was no assessment till assessment year 2002-03. Thus, WDV as on 1-4-2002 would be original cost less nil i.e., original cost. 16. As per our considered view, the question is not to determine block of assets, but to determine WDV as on 1-4-2002 for the purpose of calculating depreciation and this is determined after deducting depreciation actually allowed under IT Act, from the original cost. The decision of Pune Tribunal cited above pertains to block period from 1987-88 to 1997-98 and Rampur Distillery & Chemical Works Ltd.'s case and Madeva Upendra Sinai's case was cited and relied upon by the Tribunal and it suggests that these cases are still relevant today also. 17. In view of the above discussion, we are inclined to agree with the learned A.R. that the assessee is entitled to claim depreciation as per sub-clause (b) of section 43(6) according to which written down value of the assets acquired before the previous shall be actual cost of the assets less depreciation actually allowed in respect ....
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....39;. Reference can also be made to Supreme Court decision in case of Scientific Engg. House (P.) Ltd. v. CIT [1986] 157 ITR 86, wherein applying the functional test 'Documentation Services' obtained from foreign collaborator, i.e., supply to up-to-date, correct and complete set each of five types of documents such as manufacturing, drawing, processing documents, designs, charts, plans and other literature were held to be a 'Plant'. It held that articles must have some degree of durability and it should fulfil the functions of plant in assessee's trading activity and should be a tool of his trade with which he carries on his business. 19. In case of CIT v. Navodaya [2004] 186 CTR 357 (Ker.), it is held by the Court that building and structure can be considered to be plant provided they fulfil the functional test and are used as a tool of the trade with which the business is carried on. The Supreme Court in case of CIT v. Elecon Engg. Co. Ltd. [1987] 166 ITR 66 and CIT v. Taj Mahal Hotel [1971] 82 ITR 44 (SC) held that assets were to be classified based on Functional Test. Also in English law in case of H.M. Inspector of Taxes, Carr v. Sayer [1992] 65 TC 15 and I....