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TMI Blog1967 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... e the proportionate user for non-business purposes which has been computed at one-third, is correct. In the past years the proportionate depreciation computed for the part user for business was as follows : -------------------------------------------------------------------------------------------------------------------------------------------------- Serial Year of Cost. Depre. (normal & additional) No of purchase. allowed up to & including Vehicle. 1958-59 assessment. -------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. 1. 1955 11,368 6,221 2. 1956 9,693 3,876 3. 1957 14,500 1,772 -------------------------------------------------------------------------------------------------------------------------------------------------- It appears that all the cars were not purchased in the same year but were purchased in the respective years shown in the above table. In the assessment years 1957-58 and 1958-59 the Income-tax Officer calculated the written down value of the vehicles purchased in the earlier years by taking their actual cost and deducting the depreciation that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate that a particular portion of the cost itself does not pertain to the business. The motor cars remained the full assets of the appellant's business right through. The mere fact that a portion of the depreciation and other expenses was being disallowed, cannot warrant a deduction from the cost itself ... However having regard to the provisions of section 10(5), as it stands, I do not consider that there was any warrant for the method adopted by the Income-tax Officer in his assessment order for 1959-60 for arriving at the written down values of the cars." In the result the Appellate Assistant Commissioner ordered the Income-tax Officer to revert to the old method of computing the written down value which he had followed in the prior years. Against the decision of the Appellate Assistant Commissioner the department went up in appeal to the Tribunal and before that authority there arose a difference of opinion between the judicial Member and the Accountant Member. The Judicial Member pointed out that the expression " written down value " has been defined in section 10(5) as meaning in the case of assets acquired in the previous year the actual cost of the asset and in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e very cost is to be first apportioned for the purpose of computing depreciation allowance permissible under the Act? " The President took the same view as the Judicial Member and answered the question in favour of the assessee. He held " I have to agree with the arguments of the learned counsel for the assessee that the approach of the Accountant Member through certain obvious absurdities that result from the alternative computations is not a proper approach at all. Whatever absurdities there may be in the result, if the interpretation of the law gives the assessee a certain allowance it becomes his rightful due." After holding this he made certain further remarks which have in effect given rise to the point (b) formulated in the question referred for our decision. Those remarks are to be found in paragraph 9 of his order as follows : " If I may respectfully point out it is only in his application of the law to the facts of the case that there is a divergence. In the example he has posed for himself, he has deducted only the proportionate amount actually allowed in each year to arrive at the successive written down values. If the full depreciation that must be deemed to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ". By the use of the word " thereof " the section refers back " to such building, machinery, plant or furniture ". Therefore, in terms the depreciation allowance granted by clause (vi) of section 10(2) is in respect of the assets mentioned and it is a sum equivalent to a percentage on the original cost thereof or on the written down value thereof, but in either case it is the cost or the written down value of the asset as an asset and not on a proportionate part of an asset. Therefore, the very nature of the allowance granted by clause (vi) of section 10(2) is upon the asset as a whole and has to be computed upon the asset as a whole. Having regard to the nature of this allowance there can be no scope for splitting up either the original cost or the written down value at that stage. We are in the present case concerned with assets acquired before the previous year and in such a case the definition of " written down value " in clause (b) of sub-section (5) of section 10 also indicates the same thing, " in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Act ". Here again the computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on allowance as between the use of it for business purposes and its use for non-business purposes." We are in complete agreement with this view of the Andhra Pradesh High Court. As we have said, a more fundamental consideration, namely, the nature of the allowance and the terms upon which it has been granted itself would also lead to the same conclusion. The first part of the question posed, therefore, must be answered in the negative. Then we turn to the second part of the question, which is also upon the authorities fairly clear. We have already referred to the provisions of section 10(2)(vi) and section 10(3). These provisions have to be read in the light of the definitions contained in sub-section (5) of section 10. Omitting the unnecessary words and clauses the sub-section says : "In sub-section (2). . . . ' written down value ' means- (a) in the case of assets acquired in the previous year, the actual cost to the assessee. (b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Act, . . ." To this sub-section is added an Explanation which throws a flood of light upon the words u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " the depreciation allowance may be set off against the profits or gains under section 10(2), clause (vi), in calculating the assessable income ; and when so set off, the depreciation allowance is actually allowed. " While considering this point we may say that cases where the assessee had made a loss should be distinguished from cases where the depreciation allowance is not availed of by the assessee for other reasons. Where an assessee has sustained losses and the depreciation allowance for that reason cannot be granted, it is by virtue of the express provisions of the Explanation to section 10(5), to which we have already adverted, which permits depreciation allowable but not in fact allowed, to be treated as depreciation which is deemed to be actually allowed. In fact, the distinction serves to emphasise the words in clause (b) of section 10(5) " depreciation actually allowed ", as we have shown above. A case which is more in point so far as the facts before us are concerned is the decision of the Andhra Pradesh High Court in Vankadam Lakshminarayana v. Commissioner of Income-tax, which we have earlier referred to under the first part of the question. In that case, a joint Hin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal has happened in the present case. Upon the view taken by the President on the difference of opinion between the Judicial Member and the Accountant Member, he has agreed that though the depreciation cannot be computed by splitting up the actual cost it is to be computed by deducting from the actual cost the depreciation allowable. The point was answered by the Andhra Pradesh High Court as follows : " We feel that we cannot subscribe to the opinion of the Tribunal in regard to the interpretation of the relevant statutory provisions. Considerations such as those which the Tribunal had in mind are irrelevant in construing the provisions of the statute. If the statute allows certain advantages to an assessee, there is no reason why he should be deprived of it on preconceived notions. The decision of the question is to be solely guided by the language of section 10(5)(b) and not by section 10(3), which only lays down that if an asset is used partly for business purposes and partly for non-business purposes the assessee should be entitled only to a proportion of the amount allowable under certain clauses of that section. " This passage incidentally also answers a contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mentioned in clauses (iv), (v), (vi) and (vii) of sub-section (2) of section 10. We are in the present case concerned with the allowance in clause (vi) and clause (vi) grants the allowance upon the original cost of the assets mentioned and " in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed ". Therefore, so far as clause (vi) is concerned, the expression " written down value " in the clause last mentioned, must bear the same meaning that is given to it by section 10(5)(b) and it is this clause which is in terms referred to in section 10(3). Therefore, the definition of " written down value " is, so to say by indirect reference, written into sub-section (3) of section 10. In terms, therefore, upon a plain construction of the provisions of section 10 the definition of " written down value " in section 10(5) must govern section 10(3). In our opinion, the decision of the Andhra Pradesh High Court in Vankadam Lakshminarayana v. Commissioner of Income-tax clearly governs the present case and the principle laid down in it applies. Upon that view it is hardly necessary to refer to the other authorities but similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come. That decision is Hukumchand Mills Ltd. v. Commissioner of Income-tax. In the Supreme Court decision which we have just cited above in Commissioner of Income-tax v. Nandlal Bhandari Mills Ltd., the Supreme Court affirmed this decision of this court at page 181 by saying " Our conclusion finds support in the judgment of the Bombay High Court in Hukumchand Mills Ltd. v. Commissioner of Income-tax. We endorse the view expressed therein. " A recent decision of the Allahabad High Court in Karamat Khan v. Commissioner of Income-tax has without reference to any of the above authorities taken the same view and the principle was thus put at page 647, " When income is estimated under the proviso to section 13 it may be possible to take the question of depreciation into consideration, but that would not mean that depreciation was ' actually allowed '. What is required is an actual allowance which can only mean that the actual figure must have been duly worked out and factually allowed in the assessment order of the earlier year itself. The depreciation allowance must not only have been determined but should have actually been allowed to the assessee in order that the proviso to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation cannot be granted. Nothing therefore turns upon the construction which we have put upon the words " depreciation actually allowed " in section 10(5)(b). Section 10(3) would still continue to operate in all its force. Mr. Joshi emphasised the word " due " in sub-section (3) and he pointed out that, when the sub-section uses the words " allowance is due ", it means when the assessee is entitled to an allowance, or, in other words, when the allowance is granted to the assessee, but only a proportion of it is restricted. Even assuming that the word " due " implies grant of the allowance or the restricted portion of it we cannot suppose that the word " due " means the same thing as " actually allowed " in section 10(5). When an allowance or a right is due to an assessee, it is something to which he is entitled, but it need not necessarily be granted to him by the authorities. In other words, it may not be actually allowed to him. We think, therefore, that the words in section 10(5)(b) " depreciation actually allowed ", even as interpreted by us, would not affect section 10(3). In the result, we answer the two parts of the question posed as follows : Part (a) in the negativ ..... 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