TMI Blog1965 (9) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... year to year, in its returns while claiming depreciation on its plant and machinery, and depreciation was allowed year after year. Now there is proviso (c) to section 10(2)(vi) which says that the aggregate of all allowances in respect of depreciation made under that clause shall in no case exceed the original cost to the assessee of the plant and machinery. There comes a time when all the allowances in respect of depreciation, and this would include initial depreciation allowed to the petitioner, almost equals the original cost to him on the plant and machinery. The first assessment year, for which this period arrived, was the assessment year 1956-57. The petitioner, in its return for that assessment year, entered at a certain figure the written down value of its plant and machinery at the beginning of the accounting period, and this figure did not include the initial depreciation of ₹ 15,91,511, allowed in the assessment years 1950-51, 1951-52 and 1952-53. The written down value was calculated at ₹ 16,48,053 and depreciation was allowed by the Income-tax Officer to the extent of ₹ 2,59,236. It was overlooked that regard being had to proviso (c) to section 10(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent by reason of the omission or failure of the assessee to disclose fully and truly all material facts necessary for the assessment for that year. Mr. K.N. Rajagopala Shastri, who appears on behalf of the petitioner, contends that no default can be ascribed to the petitioner, that it filled in the statutory return according to the particulars mentioned in it, and that the petitioner was never required by the statutory return to enter anywhere that initial depreciation had been allowed in an earlier assessment year. He also urges that the petitioner could be said to have been guilty of an omission or failure to disclose to the Income-tax Officer the fact that initial depreciation had been allowed only if the statute placed an obligation or cast a duty upon it to do so. Further he points out, if the Income-tax Officer could be said to have had knowledge, or could be presumed to have had knowledge, of the fact that initial depreciation had been allowed, then, even if there was such statutory obligation or duty upon the petitioner, income cannot be said to have escaped assessment because of any omission or failure to disclose that fact. Disclosure , he urges, must imply making k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i points out that because of the express reservation that initial depreciation shall not be deductible in determining the written down value for the purposes of the clause, the petitioner was not at fault when, while entering the written down value in column 2 of Part V of the return, he did not take into account the initial depreciation. Mr. Gulati, however, relies upon section 10(5)(b) where written down value for the purposes of sub-section (2) of section 10 has been declared to mean, (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 ... Mr. Gulati says that this definition of written down value applies throughout whenever the expression has been used in section 10(2), and therefore when setting out the written down value in column (2) of Part V of the return, the petitioner was bound to take into account all the depreciation actually allowed to it, and this would include initial depreciation. I find it difficult to accept the submission of Mr. Gulati. Clause (b) of section 10(5), on which he relies, was brought into the Income-tax Act in 1941, while the provision i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im. It was bound to disclose all material facts which went to show what was the true amount of the allowance to which it was entitled. It was entitled to only such allowance as the law permitted it. The statute declared it entitled to the allowance under section 10(2)(vi), but also by proviso (c) of that clause declared that it was entitled to only so much depreciation allowance as did not exceed the aggregate of all the allowances in respect of depreciation made under that clause. The fact that it had been allowed initial depreciation earlier was material for the consideration of its claim to depreciation allowance in the assessment year 1956-57. It was a material fact necessary for its assessment for that year, and it was bound to disclose all material facts necessary for its assessment for that year. It was bound to inform the Income-tax Officer of this fact when establishing its claim to the allowance under section 10(2)(vi). The obligation was necessarily implied when it sought the benefit of section 10(2)(vi). I am also of opinion that it cannot be said that the Income-tax Officer must be presumed to have known that initial depreciation had been allowed in an earlier year. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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