TMI Blog1999 (7) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act as it stood at the relevant time the Tribunal is right in holding and in directing the Assessing Officer to take the written down value as at the beginning of the year without further reducing it by the amount of initial depreciation ? 2. Whether, on the facts and in the circumstances of the case, the Circular No. 372 dated December 8, 1983 has correctly interpreted the provision of law ?" The relevant facts are as follows : The assessee was granted depreciation under section 32(1)(iv) of the Income-tax Act, 1961. The assessment proceedings were originally completed by accepting the written down value, as stated by the assessee, for the purpose of depreciation. Subsequently, proceedings were initiated under section 154 by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of as may in any case or class of cases be prescribed.... (iv) in the case of any building which has been newly erected after the 31st day of March, 1961, where the building is used solely for the purpose of residence of persons employed in the business and the income of each such person chargeable under the head 'Salaries' is ten thousand rupees or less, or where the building is used solely or mainly for the welfare of such persons as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch room, a sum equal to forty per cent. of the actual cost of the building to the assessee in respect of the previous year of erection of the building ; (but any such sum shall not be deductible in determining the wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with the precentage provided under the Income-tax Rules. Clause (iv) deals with a special category of building as detailed therein. In respect of such buildings, a sum equal to 40 per cent. of the actual cost of the building to the assessee in respect of the previous year of erection of the building will be granted as depreciation. A reading of clause (iv) would clearly show that the special provision for depreciation provided therein is a one-time benefit in respect of newly erected buildings. The benefit is not being granted for the succeeding years. It is also to be noted that the percentage of depreciation is fixed in the Act itself unlike under clause (ii) where the percentage is fixed as per rules. After granting a special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reworked, unless the amendment is retrospective in nature. Learned counsel for the Revenue contended that the provision contained in the circular has very strong persuasive value since it was issued by the authority who has to work out the provisions of the statute. In support of the above contention, he placed reliance on K. P. Varghese v. ITO [1981] 131 ITR 597 (SC). The relevant portion of the Central Board of Direct Taxes Circular, is reported is as follows : "22.3 Under section 32(1)(iv), initial depreciation equal to 40 per cent. of the actual cost of buildings used solely for the purpose of residence of low paid employees or for welfare activities for such employees is allowed in computing the taxable profits and gains of the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see contended that when the statutory provision is very clear there is no need to take recourse to circulars issued under section 119 of the Income-tax Act. According to the assessee, a combined reading of clauses (ii) and (iv) with the definition of the term "written down value" there cannot be any doubt that 40 per cent. special depreciation granted under clause (iv) in respect of a newly erected building years back cannot be deducted in arriving at the written down value for the assessment year 1984-85 and subsequent years. It is true that going by the circular the amendment brought under the Finance Act, 1983, would apply in computing the written down value of such buildings for the assessment year 1984-85, even though initial depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Income-tax Act, 1922. It was held that the Income-tax Officer was entitled in law to go behind the original cost accepted by his predecessor. The limit to which the Income-tax Officer can go back does not stop at the written down value of the previous year but extends up to the figure of the original cost, and the method enjoined by section 10(5)(b) of the Income-tax Act is not that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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