TMI Blog1961 (10) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... We are concerned with the assessment year 1955-56, the relevant accounting year being ending 31st March, 1955, and the question arises thus: The assessee-company was incorporated on 15th June, 1949, as a private limited company. Later it became a public limited company in the year 1949. On its incorporation it started a factory forthwith in the former Dharampur State for manufacturing leather cloth and coated fabrics from cloth, coarse and medium, P.V.C. resin, plasticisers, pigments, etc. Before its incorporation the promoters of the company negotiated with the Ruler of Dharampur State and secured from the Ruler in advance a total exemption from the State income-tax on the profits of the company for a period of seven years from the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I (Commissioner) have the honour to inform you that it has been decided by the Government of India that your company will be exempt from income-tax and super-tax for a period of five years with effect from the 1st April, 1950. The shareholders of the company will, however, be liable to pay tax on the amount of dividends received by them. In consequence of this order made by the Central Government, the assessee-company stood exempted from payment of income-tax and super-tax up to the assessment year 1954-55. The assessment year with which we are concerned was the first year in which the assessee-company has been assessed to tax. In the course of the assessment proceedings, the assessee, inter alia, contended that this being the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l affirmed the facts found by the Income-tax Officer that the machinery and other assets of the company were in use in the previous years. Having regard to that fact, the Tribunal upheld the order of the Income-tax Officer and the Appellate Assistant Commissioner. The view taken by the Tribunal was that the exemption granted to the assessee was only in respect of tax and not against the computability of his income. Theoretically, therefore, computation for the various years must be deemed to have been made for each year in the manner required by the Act. The depreciation allowance must, similarly, be deemed to have been claimed by the assessee in each year. The words actually allowed in section 10(5)(b), on which reliance was placed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and super-tax. The assessee-company thus was not exempted from its income being computed. It is open, therefore, to the department to deal with the case as if in the previous years the procedure required to be followed in the matter of computation of total income of the assessee had been duly followed, i.e., as if the assessee had filed returns, as if he had claimed depreciation on the machinery and assets and as if the Income-tax Officer had allowed the depreciation claimed in accordance with law, and on this footing determine the written down value of the machinery, plant and assets of the assessee and on that basis determine the amount of depreciation allowable to the assessee in the assessment year with which we are concerned. He has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the aforesaid provisions it is clear that the assessee is entitled to an allowance on account of the depreciation on machinery at the prescribed rate on the written down value of the machinery, etc., and the written down value of the machinery, acquired prior to the previous year, is the actual cost minus depreciation actually allowed. It necessarily follows that if in the prior years no depreciation has been actually allowed, then the actual cost incurred by the assessee for acquiring the machinery would be the written down value of the machinery. It is further clear that if the assessee desired to claim depreciation, he must supply the required particulars. In the event the particulars are not supplied by the assessee then depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was carried forward to the following year 1942-43. A question arose as to what should be the written down value of the assets for the year 1942-43. It was the contention of the assessee that the written down value should be taken at ₹ 9,08,003 inasmuch as in the prior year the allowable depreciation of ₹ 87,244 was not actually allowed. On the other hand, the contention of the department was that the written down value should be taken at ₹ 9,08,003 less ₹ 87,244, the amount of depreciation ascertained in the prior year. It was held that as there was loss in the prior year, the depreciation allowance of ₹ 87,244 was not set off and, therefore, it could not be said to have been actually allowed. It is, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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