TMI Blog1992 (4) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... terminal allowance was arrived at as follows :-- Rs. The closing WDV of Plant Machinery for the assessment year 1984-85 taken as the opening WDV for 2,03,529 assessment year 1985-86 Less : Sale value of Plant Machinery sold during the previous year relevant to the A.Y. 1985-86 85,000Terminal allowance determined by the ITO for assessment ----------------- year 1985-86 1,18,529 ------------------ Section 32(1)(iii) as far as relevant for our purposes is as follows :-- " 32(1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall subject to the provisions of section 34, be allowed-- (iii) in the case of any building, machinery, plant or furniture which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fell short of the written down value thereof : Provided that such deficiency is actually written off in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WDV taken by the ITO for the Assessment Year 1984-85 2,03,528 ---------------- Opening WDV for the Assessment Year 1985-86 as adopted by the ITO 2,03,528 ---------------- According to the assessee, the depreciation not actually allowed for assessment year 1976-77 viz., Rs. 47,280 should not also be taken as the depreciation actually allowed and the total depreciation should consequently be not taken at Rs. 3,21,812 but should be taken only at Rs. 2,74,532 and consequently the correct figure of terminal allowance which should be allowed for the assessee, is Rs. 2,50,808 instead of only Rs. 2,03,528. Thus, the contention between the assessee and the department is confined to the prayer that the terminal allowance should be further enhanced by a sum of Rs. 47,280. The circumstances under which the depreciation for assessment year 1976-77 viz., Rs. 47,280, should be deemed not to have been actually allowed within the meaning of section 43(6), is explained to us to be the following :-- 3. The assessee filed the assessment order dated 30-11-1976 which is relating to assessment year 1976-77. In the said assessment order, though the amount of Rs. 48,883 was held to be the admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance at Rs. 1,65,808, the ITO allowed the only sum of Rs. 1,18,529 and thus, the short allowance of Rs. 47,280 towards terminal allowance forms the subject-matter of the appeal. 4. The assessee filed 154 application before the ITO asking him to rectify the mistake in allowing the correct terminal allowance in the assessment order dated 16-6-1986 for assessment year 1985-86 which according to the assessee, is apparent on record. The ITO by his orders dated 9-3-1988 refused to carry out the rectification of his assessment order for assessment year 1985-86 on the ground that the depreciation of Rs. 47,280 for the assessment year 1976-77 was allowed to be carried forward and that if it was not allowed in a later year the mistake was in not giving the set-off in a later year. The ITO further stated that the assessee should approach for the modification of the assessment of the later relevant year and that the assessee cannot ask for the rectification of the current assessment year 1985-86. 5. Aggrieved against the order dated 9-3-1988 refusing to rectify the assessment and thereby grant correct terminal allowance, the assessee filed an appeal before the CIT(Appeals). The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward, is unsustainable and wrong under law. While ascertaining the income under the head 'other sources' also, the depreciation is to be carried forward for the later years, as per the provisions of Section 57 clause (ii), the relevant portion of which is as follows :-- " Section 57 : The income chargeable under the head 'Income from other sources' shall be computed after making the following deductions, namely :-- (ii) in the case of income of the nature referred to in clauses (ii) and (iii) of the sub-section (2) of section 56, deductions, so far as may be, in accordance with the provisions of sub-clause (ii) of clause (a) and clause (c) of section 30, section 31 [sub-sections (1), (1A) and (2) of section 32 and subject to the provisions of section 38]. " It is enough if we keep it in mind that clauses (ii) and (iii) of sub-section (2) to section 56, deal with the income obtained from the leasing out of the plant and machinery or furniture. Therefore, it is clear from the conjoint reading of section 56(2)(ii) and (iii) and section 57(ii), that even in a case where income is derived from letting out of plant and machinery, furniture etc., the depreciation can be claimed to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the figure of the original cost, and the method enjoined by section 10(5)(b) of the Income-tax Act, is not that Income-tax Officer should merely scale down the written down value of the previous year, but that he should take into consideration the actual cost, determining it for himself, if necessary, take also into consideration the allowances granted in the past, and then make his own computation as to the written down value for the assessment year with which he is concerned. Thus it cannot be said that merely because under section 35 some written down value and the depreciation amount have been determined they are a final determination binding for all times to come ; nor does the determination operate as estoppel or res judicata for the following years. " In this connection the decision of the Hon'ble Supreme Court in Madeva Upendra Sinai v. Union of India [1975] 98 ITR 209 is referred. The true meaning of the words 'actually allowed' occurring in section 43(6) of the IT Act, 1961 was given as follows :-- " (i) The key word in clause (b) of section 43(6) of the Income-tax Act, 1961, is 'actually'. It is the antithesis of that which is merely speculative, theoretical or imagi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V. Purushothama Rao, learned Chartered Accountant for the assessee, the learned Departmental Representative relied upon the orders of the lower authorities and argued that before granting rectification, there should be apparent mistake for assessment year 1985-86. When the mistake even according to the assessee, was found in the assessment order and rectificatory order concerning to assessment year 1976-77, how can such a mistake be considered as a mistake committed in assessment year 1985-86. Further, it was submitted that the assessee though, was running in losses from assessment year 1976-77 to 1980-81, its financial position turned the corner and the assessee was getting fat income at least from assessment year 1980-81 onwards. Thus, according to the learned Departmental Representative, the assessee should have moved for the rectification i.e., for carry forward of depreciation and its absorption from the incomes derived by the assessee for assessment years 1981-82 to 1985-86. The assessee did not take initiative to get any of the assessment orders of those years rectified. Having slept over its rights it is too late in the day now to agitate for rectification in the year in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... While determining the terminal allowance, only the question of written down value would become relevant. Whenever we have to determine the written down value, then its definition under section 43(6) should be applied. The written down value has no relevance while considering either section 72 or 73 of the IT Act. Further Maharana Mills (P.) Ltd.'s case or Madeva Upendra Sinai's case were not cited or considered by the Calcutta High Court since they were not at all relevant for their purpose. That itself would disclose that the Calcutta High Court decision relied on by the learned Departmental Representative has no application to the facts of the case. Even B.C.S. Kartar Chit Fund Finance Co. (P.) Ltd.'s case relied on by the learned D.R. deals with carry forward and set off of losses, the losses of earlier years were not claimed against profits of immediately succeeding year or years. In such a case it was said that the limitation of 8 years would operate and if the losses sustained are not set off against the profits of the immediately succeeding year or years during the limitation period of 8 years, it was held that they cannot be set off against the profits of later date. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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