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Allied Publishers Private Ltd. Vs. Commissioner of Income-tax Bombay City I - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 76 of 1962
Judge
Reported in[1968]68ITR546(Bom)
ActsIncome Tax Act, 1922 - Sections 10(2), 10(3) and 10(5)
AppellantAllied Publishers Private Ltd.
RespondentCommissioner of Income-tax Bombay City I
Appellant AdvocateM.M. Khanna, Adv.
Respondent AdvocateG.N. Joshi, Adv.
Excerpt:
direct taxation - depreciation - sections 10 (2), 10 (3) and 10 (5) of income tax act, 1922 - matter pertains to calculation of depreciation where an asset is partially used for purpose of business - question of consideration whether asset was fully used for business can arise after full depreciation is computed - section 10 (3) comes into operation only after depreciation is firstly computed in terms of section 10 (2) (6) or 10(5) - section 10 (3) enjoins that allowance shall be restricted to fair proportional part of amount which would be allowable if such asset was wholly used - words 'depreciation actually allowed' in section 10 (5) would not affect section 10 (3) - held, proportionate depreciation can be calculated by deducting from original cost of asset only the actual depreciation.....kotval, c.j.1. the question referred under section 66(1) of the indian income-tax act for our decision in the present case is as follows : 'whether, on a proper construction of sections 10(2) (vi), 10(3) and 10(5), where an asset is partially used for purposes of business, proportionate depreciation can be calculated (a) by taking proportionate part of the cost of the assets, or (b) by deducting from the original cost of the asset only the actual depreciation allowed for part user ?' 2. the facts upon which this question arises are as follows : we are concerned here with the assessment year 1959-60. the assessee is engaged in the publishing trade and for its purposes owned three cars as one of its business assets. these cars, however, were also being used partially for the personal use of.....
Judgment:

Kotval, C.J.

1. The question referred under section 66(1) of the Indian Income-tax Act for our decision in the present case is as follows :

'Whether, on a proper construction of sections 10(2) (vi), 10(3) and 10(5), where an asset is partially used for purposes of business, proportionate depreciation can be calculated (a) by taking proportionate part of the cost of the assets, or (b) by deducting from the original cost of the asset only the actual depreciation allowed for part user ?'

2. The facts upon which this question arises are as follows : We are concerned here with the assessment year 1959-60. The assessee is engaged in the publishing trade and for its purposes owned three cars as one of its business assets. These cars, however, were also being used partially for the personal use of the directors of the company. There is no dispute that for this personal use 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 & includingVehicle. 1958-59 assessment.---------------------------------------------------------------------Rs. Rs.1. 1955 11,368 6,2212. 1956 9,693 3,8763. 1957 14,500 1,772---------------------------------------------------------------------

3. 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 would be allowed had it been wholly used for purposes of business; then he divided the depreciation so calculated pro rata between the use of the assets for business purposes and for private purposes. Thus, in arriving at the written down value the Income-tax Officer did not deduct merely the proportionate depreciation allowed but the whole of the depreciation calculated on the cost of the three vehicles and only two-thirds of it was allowed for business purposes. The assessee objected to this computation and in each of those two years had appealed to the Appellate Assistant Commissioner, as a result of which the assessee was held entitled to have the written down value computed by deducting from the cost the depreciation that was actually allowed only.

4. In the assessment year with which we are concerned, 1959-60, however, the Income-tax Officer changed the whole mode of calculation. He divided the cost of the vehicles in the proportion of their user, namely, two-thirds to one-third, and computed the depreciation upon such proportionate cost. In other words, he took the cost of the vehicles at two-thirds of their actual cost and calculated the depreciation on the two-thirds cost. Against this mode of computation of the depreciation and the written down value, the assessee went up in appeal to the Appellate Assistant Commissioner, and the Appellate Assistant Commissioner by his order dated 16th February, 1962, set aside this mode of computation and directed the Income-tax Officer to follow the method which he had followed in the past years. The Appellate Assistant Commissioner observed :

'For the assessment year 1959-60, the Income-tax Officer followed a novel method of computing the written down value by treating only 2/3rd of the original cost of the cars as the cost relevant for depreciation purposes, and with this as the starting point, he computed the written down values for the successive years by deducting the depreciations actually allowed by him (which was 2/3rd of the depreciation claimed by the company). In this manner he arrived at the written down values of the three motor cars as at manner he arrived at the written down values of the three motor cars as at January 1, 1958. ...... While it is open to the Income-tax Officer to disallow any part of he expenses connected with the maintenance of the motor-cars (including depreciation thereon), it appears to me that he cannot bifurcate the price or cost of the asset and demarcate 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.'

5. 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.

6. 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 of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under the Income-tax Act and section 10(3) contemplates the computation of the amount as if the machinery, etc., was wholly used for the purposes of the business and after computation of the depreciation on that asset a fair proportional part of the amount is required to be allowed under the provisions of section 10(2) (vi) read with section 10(3). He felt that upon the provisions of sections 10(5) and 10(2) (vi) and (via) and even having regard to the provisions of section 10(3) it was not possible to hold that when an asset of the assessee, was partially used, the cost of it can be disintegrated so as to take the proportionate part thereof as the actual cost of the asset. He pointed out that the asset is a single asset and its cost is also a single figure. He, therefore, was of the opinion that the Appellate Assistant Commissioner's view was correct.

7. The Accountant Member, however, did not agree with this view. By a series of calculations and computations he pointed out that computing the written down value in this manner would largely render section 10(3) nugatory because it would entitled an assessee in a given case to the personal use of the car and yet give him depreciation on the entire cost of the asset after a number of years. He observed : 'Once the cost of acquisition of the asset acquired for business and personal purposes is apportioned, then, working on the basis of the apportioned cost gives the result which is consistent with the scheme of allowance to be made under section 10, viz., any allowance that is to be made should exclusively relate to the purpose of the business'.

8. Upon this difference of opinion between the two learned Members of the Tribunal the matter went before the President. It appears that the two differing members of the Tribunal had formulated a point for decision which the President has stated as follows : 'The point is where an asset is partly used for the purposes of the business and partly for non-business purposes, what is the correct mode of computation of the depreciation allowance year after year in respect of that asset Is it to be computed on the entire cost of acquisition of the asset without first apportioning it (i.e., the cost of acquisition) to the purposes for which it is acquired or the 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 actually allowed in each year on the basis of the notional full user that is contemplated in the section is deducted in his computation, he would have arrived at the identical answers as that of his colleague.'

9. Now the two parts of the question referred pose two different modes of computation of the depreciation and the question is whether, on the facts and circumstances of this case, one or the other or neither should be followed.

10. So far as the first part of the question referred is concerned, there is little difficulty and that mode of computation was not even supported on behalf of the department. As we have shown, the Income-tax Officer in computing the depreciation allowance first took the actual cost and divided it into two parts, namely, that part which would be attributable to business it into two parts, namely the part which would be attributable to the personal use of the cars by the directors and then he computed the depreciation on each part separately. That mode of computation was the principal point before the Appellate Assistant Commissioner and the Appellate Assistant Commissioner disagreed with that method of computation of depreciation and ordered the Income-tax Officer to compute the depreciation as he had done in the prior years, namely, to take the cost of the asset first and compute the total depreciation due upon the asset and then pro rate divide the depreciation in the proportion in which he finds that the asset was being used either for business purposes or for personal use. It seems to us that in this respect the view which the Appellate Assistant Commissioner took was a perfectly correct view because, in the first place, it is patent upon a mere reading of the terms of the section upon which depreciation allowance is granted by the Act. Clause (vi) of section 10(2) grants this allowance 'in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent..... to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed 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'. The depreciation, therefore, is in respect of 'such building, machinery, plant or furniture' and it consists of a sum equivalent to 'such percentage on the original cost thereof'. 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.

11. 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 the 'written down value' is also to be made of the asset treated as a business asset. In considering this question it seems to us that the nature of the allowance and the terms upon which it has been granted by the section are plenary and we do not think, as the learned Accountant Member thought, that section 10(3) could make any difference. Section 10(3) is a section which only deals with the question of how the depreciation has to be computed where an asset is not wholly used for the purposes of business and, in that case, it directs that the allowance shall be restricted 'to the fair proportional part of the amount which would be allowable' if such asset was wholly so used. Even upon the terms of sub-section (3), therefore, the depreciation allowance under clause (vi) or clause (via) of section 10(2) has to be first arrived at in respect of the asset and then and then alone would sub-section (3) come into operation. There appears to be nothing in section 10(3) which justifies the calculation of the depreciation allowance after splitting up at the inception the cost of the asset or the written down value.

12. On this question, we do not find much assistance from the authorities, not, we presume, because the point itself did not suggest itself to anyone but because the point in our opinion is so obvious. There is, however, a discussion of a similar point raised in the case of Vankadam Lakshminarayana v. Commissioner of Income-tax before the Andhra Pradesh High Court. The contention was thus answered at page 530 :

'We have to deal with another theory propounded by the Tribunal and which is sought to be sustained by the learned counsel for the department, namely, that the concept underlying section 10(3) is that the asset used partly for business purposes and partly for non-business purposes should be regarded as half the asset used for business purposes and, therefore, in calculating the original cost price of the asset, only half its price should be taken into account. We find it difficult to share this view as there is no basis for such division or the splitting up of the asset into two. On the other hand, the language of section 10(3) makes it plain that such a theory cannot be sustained. It is not the division of the asset as being used for business and non-business purposes that is contemplated by the section but only apportionment of the depreciation allowance as between the use of it for business purposes and its use for non-business purposes.'

13. 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.

14. 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,....'

15. To this sub-section is added an Explanation which throws a flood of light upon the words used in clause (b) 'depreciation actually allowed'. The Explanation is :

'Explanation. - For the purposes of this sub-section, the expression 'actual cost' means the actual cost of the assets to the assessee reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by Government or by any public or local authority, and any allowance in respect of any depreciation carried forward under clause (b) of the proviso to clause (vi) of sub-section (2) shall be deemed to be depreciation 'actually allowed'.'

16. Reading the Explanation side by side with clause (b) of sub-section (5) it is clear that the legislature has made a clear-cut distinction between 'depreciation actually allowed' and an allowance which shall be deemed to be depreciation 'actually allowed'. It is clear that when the legislation speaks of depreciation actually allowed it means what in fact is the advantage obtained by the assessee by that allowance and not any notional or other advantage.

17. A consideration of the authorities - and there are several of them on this question - reinforces this conclusion. The earliest in this respect is the decision in Commissioner of Income-tax v. Kamala Mills Ltd. In that case in the charging year 1941-42 the written down value of certain assets of the mills was Rs. 9,08,003 and the depreciation 'allowable' was found to be Rs. 87,244, but as the mills sustained a loss it could not avail of the allowance of depreciation for the allowance is only against profits and the amount of Rs. 87,244 had to be carried forward to the following year 1942-43. The question was what should be the written down value in the charging year 1942-43. Should it be the actual cost, namely, Rs. 9,08,003 or should it be Rs. 9,08,003 minus Rs. 87,244 which was the depreciation allowable under the provisions as computed, but of which the mill got no advantage because it had sustained a loss. It was held that the written down value would be the actual cost and not the actual cost less the depreciation, because the depreciation was not 'actually allowed'. The Division Bench pointed out that the words 'actually allowed' are unambiguous and connote the idea that the allowance was in fact given effect to or 'in other words' it should be an allowance which has resulted in monetary advantage to the assessee. They made it clear further by observing that '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.

18. A case which is more in point so far as the facts before us are concerned is the decision of the Andhara 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 Hindu family had purchased a new motor car for Rs. 13,144 in December, 1952, for the purposes of its business and partially for the personal use of the members of its family. For the assessment years 1953-54, 1954-55 and 1955-56 depreciation was allowed on the car under section 10(2) (vi) and sub-clause (via) (because it was a new car) of the Income-tax Act. The assessee sold the car in 1955 for a sum of Rs. 4,025 and he claimed allowance of a loss of Rs. 708 under section 10(2) (vii) in the assessment year 1956-57. The Income-tax Officer, however, in ascertaining the written down value of the car, took into account the depreciation which was allowable for that year and not what was actually allowed under section 10(3) and computed the loss at Rs. 78. The question was what was the true written down value of the car. It was held that the written down value of the car had to be ascertained as provided by section 10(5) (b) by taking into account only the depreciation actually allowed to the assessee and not any national allowance permissible under section 10(2) (vi) or 10(2) (via). In coming to this decision, the Andhra Pradesh High Court was also faced with the contention, as has been raised in the present case before us also, that section 10(3) prevents computation of the written down value in this manner and that contention was met by the following observation at page 529 :

'We have to adjudicate upon the claim of the assessee on the basis of the definition of written down value of the vehicle, since section 10(2) (vii) contemplates the ascertainment of the loss in the light of the difference between its written down value and the price for which it is sold. The matter is a bit complicated by reason of the existence of section 10(3) which restricts the allowance admissible under clause (iv), (v), (vi) or (vii) of sub-section (2), when the asset envisaged therein is not wholly used for the purposes of the business, profession or vocation, to the fair proportional part of the amount which would be allowable if such building, machinery, plant or furniture was wholly so used. It is this sub-section that impelled the Tribunal to take the view that the entire deportation allowance calculated at rates mentioned in the two clauses should be taken into account in computing the written down value.'

19. It will be noticed that that is precisely what in the ultimate decision of 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.

20. 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.'

21. This passage incidentally also answers a contention which was advanced before us on behalf of the department that upon the construction which commends itself to us the provisions of section 10(3) would be rendered nugatory. We will advert to this point a little later.

22. In deciding the case the Andhra Pradesh High Court pointed out that there is a distinction between the depreciation allowable to an assessee and the depreciation allowed to him and that section 10(5) (b) speaks only of depreciation actually allowed and not 'allowable'. At page 530 they put the argument thus :

'In this connection, we cannot ignore the words 'depreciation actually allowed' to the assessee in section 10(5) (b). Having regard to that language, we do not think that we will be justified in taking into account the notional allowance that might be admissible under the clauses. The legislature has advisedly used the words 'actually allowed to the assessee'. If the intendment of the legislature was that the whole of the depreciation allowance permissible under those clauses were to be taken into account, surely it would have used appropriate language to convey that thought. We cannot assume that the legislature was not aware of the distinction between 'depreciation allowable to an assessee' and 'depreciation allowed to him', as used in clause (b) of section 10(5). That the legislature is aware of this difference is apparent from the language used in the proviso to clause (b).'

23. This view has our respectful concurrence, but we may also usually add here another point. No doubt, the definition of 'written down value' as such in section 10(5) does not in terms find place in section 10(2). There are no words 'written down value' to be found in section 10(3) and it is that which has encouraged the contention that section 10(3) is plenary and is not governed by section 10(5) (b). No doubt in terms the phrase 'written down value' as defined in section 10(5) is not to be found in section 10(3) but a closer consideration of section 10(3) shows beyond doubt that it cannot be construed without the use of the definition of that expression in section 10(5). Section 10(3) commences with the words 'Where any building, machinery, plant or furniture in respect of which any allowance is due under clause (iv), clause (v), clause (vi) or clause (vii) of sub-section (2).... '. In terms, therefore it refers to those allowances which are 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.

24. Upon that view it is hardly necessary to refer to the other authorities but similar principles have been adverted to in several of the case of the highest authority which we must mention at this stage. In a case which arose from this court, Dharampur Leather Cloth Co. Ltd. v. Commissioner of Income-tax, the Supreme Court had occasion to consider the definition of 'written down value' in section 10(5) (b). That appellate decision is to be found in Commissioner of Income-tax v. Dharampur Leather Co. Ltd. The Supreme Court (at page 168) referred to another judgment of theirs delivered on the same day in Commissioner of Income-tax v. Straw Products Ltd. and observed : 'Mr. Shastri, the learned counsel for the appellant, first urges that on a proper interpretation of section 10(5) (b) of the Act, the depreciation must be deemed to have been allowed to the assessee in the years in which the income of the assessee-company was exempted. There is no force in this contention. We have delivered judgment today in Commissioner of Income-tax v. Straw Products Ltd. and held that the words actually allowed in paragraph 2 of the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, did not include any notional allowance. Following that judgment, we must interpret the words 'actually allowed' occurring in section 10(5) (b) of the Act in the same manner. ' The decision in Commissioner of Income-tax v. Nandlal Bhandari Mills Ltd. arose in appeal by special leave against the decision of the Madhya Pradesh High Court in Nandlal Bhandari Mills Ltd. v. Commissioner of Income-tax. Similar question have several times arisen where an assessee is first assessed as a non-resident and his income liable to Indian Income-tax is computed in proportion to his world income under rule 33 of the Indian Income-tax Rules. In such cases, when the question of determining the 'written down value' of his business assets arises in the subsequent years, the question inevitably arises what should be the depreciation to be taken into account. In one such case a Division Bench of this court (to which my learned brother was a party) held that only that part of the depreciation as has entered into the computation of the income liable to tax under the Indian Income-tax Act can be taken into account to determine the business asset in view of the definition of 'written down value' in section 10(5) (b) of the Act and not the full depreciation calculated in determining his total world income. 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.'

25. 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 10(2) (vii) is attracted.'

26. In the face of this spate of authorities there can be only answer to the second part of the question referred and that must be in the affirmative.

27. Counsel on behalf of the department did attempt to support the view taken in this case by the Accountant Member by pointing out that, if he were to confine the written down value to the cost minus the depreciation upon the interpretation which we have given to the words 'depreciation actually allowed', then section 10(3) would be rendered largely nugatory. In this respect we can only say that so far as the income-tax law is concerned, where the words of the statute are clear, we cannot enter into considerations such as these, or any detriment which may arise to either party, i.e., the revenue or for the assessee. We have shown that upon a plain reading of the relevant statute when section 10(5) (b) says 'depreciation actually allowed', it means just that and nothing else. It means a depreciation of which the assessee has received effective advantage or benefit and not merely depreciation which is notionally allowed or which is allowable. We have already referred to the remarks of the Andhra Pradesh High Court in throwing out a similar argument in Vankadam Lakshminarayana v. Commissioner of Income-tax, 'if the statute allows certain advantages to an assessee, there is no reason why he should be deprived of it on preconceived notions.'

28. Moreover, we do not think that even upon the interpretation which we have given to the words. 'depreciation actually allowed' under section 10(5) (b), its effect upon section 10(3) is anything so drastic as is made out, much less is it rendered nugatory. Section 10(3), as we have pointed out, comes into operation only after depreciation is first computed in terms of section 10(2) (vi) or (via) read with section 10(5). It is only after full depreciation is computed that the question of considering whether the asset was not wholly used for the purpose of business can arise and in that event, the sub-section enjoins that the allowance shall be restricted to 'the fair proportional part of the amount which would be allowable if such asset was wholly so used'. Sub-section (3) is only a sort of exception engrafted upon the provisions of clauses (iv), (v), (vi) and (vii) and it points out that where the asset is not wholly used for the business the full 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).

29. In the result, we answer the two parts of the question posed as follows : Part (a) in the negative. Part (b) in the affirmative. The Commissioner shall pay the costs of the assessee.


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