1989 (9) TMI 93

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....court, the Income-tax Appellate Tribunal, Nagpur Bench, has referred the following question of law to this court for its opinion: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing the Income-tax Officer to allow depreciation to the assessee-trust as claimed by it ?" The material, facts giving rise to this reference, briefly, are as ....

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....f the Revenue that the aforesaid question of law has been referred to this court for its opinion. Having heard learned counsel for the petitioner, we have come to the conclusion that the reference must be answered in the affirmative and against the Revenue. It was contended on behalf of the Revenue that depreciation under section 32 of the Act could be allowed only when income was computed unde....

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....or depreciation is to spread the expenditure, incurred in acquiring the asset, over its effective lifetime ; the amount of the provision, made in respect of an accounting period, is intended to represent the proportion of such expenditure, which has expired during that period. At the end of its effective life, the asset ceases to earn revenue, i.e., the capital value has expired and the a....

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....set has been made. Moreover, unless provision is made for depreciation, the balance-sheet will not present a true and fair view of the state of affairs ; assets should be shown at a fIgure which represents that part of their value on acquisition which has not yet expired'." It was not disputed that the mercantile system of accounting was followed by the assessee. In that case, as held in CI....