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TMI Blog1964 (9) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... oks for the calendar year 1953, the previous year for assessment year 1954-55, it wrote off Rs. 1,21,245 as depreciation as follows: Rate Amount Rs. Buildings 10% 1,06,940 Air-conditioning plant 15% 2,973 Lifts 15% 6,214 Transformers 15% 1,442 Internal telephone 15% 3,676 --------------------- Total 1,21,245 --------------------- It was common ground before the Income-tax Appellate Tribunal that one-fifth of the building could be considered as occupied for its own purposes and the remaining four-fifths as let out to tenants for rent. The Income-tax Officer disallowed four-fifths of the depreciation claimed on the ground that "the rentals received from this 4/5ths portion are being shown separately under the head 'Property' which income in turn has been claimed as 'exempt' under section 4(3)(xii). Had there been no exemption in the property income there would have been a statutory allowance which would compensate for depreciation. The fact that the whole income is exempt further strengthens that no allowance regarding these portions could be made." On appeal, the Appellate Assistant Commissioner disallowed the whole claim (including that allowed by the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and other assets so as artificially to reduce the surplus, such adjustment shall be made to the allowance for depreciation of, or to the amount to be included in the surplus in respect of appreciation of, such securities and other assets, as shall increase the surplus for the purposes of these rules to a figure which is fair and just;... 6. The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the Insurance Act, 1938 (4 of 1938), to be furnished to the Controller of Insurance after adjusting such balance so as to exclude from it any expenditure other than expenditure which may under the provisions of section 10 of this Act be allowed for in computing the profits and gains of a business. Profits and losses on the realisation of investments and depreciation and appreciation of the value of investments shall be dealt with as provided in rule 3 for the business of life insurance. " Mr. Viswanatha Sastri contends that the Insurance Act, 1938 (IV of 1938), makes detailed provisions to ensure the true valuation of assets and the determination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be shown separately. After the balance-sheet, profit and logs account and revenue account have been prepared, they have to be audited unless they are subject to an audit under the Indian Companies Act. Under section 15 the audited accounts and statements above referred to have to be furnished to the Controller as returns. Section 18 requires every insurer to furnish to the Controller a certified copy of every report on the affairs of the concern which is submitted to the members or policyholders of the insurer. Section 21 enables the Controller to get such further information from the insurer as he may consider necessary to correct or supplement a return, to examine books of accounts, registers and documents or to examine any officer. The Controller may decline to accept any return unless the inaccuracy has been corrected or the deficiency has been supplied. If he declines to accept any return, the insurer shall be deemed to have failed to comply with the provisions of section 15, section 16 or section 28 or section 28A relating to the furnishing of returns. Sub-section (2) of section 21 enables an insurer to apply to the court for cancellation of any order made under cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities and the price of stocks and shares fluctuates, provision has been made in rule 3(b) to make adjustments. Rule 3(b) in its main part speaks of adjustments on the basis of the accounts and amounts as entered in the accounts determine what must be added to or deducted from the surplus. The Income-tax Officer must deduct from the annual average of the surplus for purposes of rule 2 any amount entered in the account to cover depreciation of the securities and assets and add any amount taken credit for on account of appreciation. The Income-tax Officer here follows the accounts and gives effect to the entries such as they are. The provision is mandatory and the Income-tax Officer has no discretion." He then adds: " The entire subject of such disparity between fact and actual entries is comprehended in the proviso. " It seems to us that this court has held in categorical terms that rule 3(b) does not empower the Income-tax Officer to adjust the accounts on the basis of a revaluation made by him or to correct the discrepancy between what is entered in the accounts and what is fact. Mr. Ganapathy Iyer tried to distinguish the case on the ground that rule 6 was not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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