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Additional Commissioner of Income Tax Vs. Kishore Chand Shiv Charanlal. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberI.T.R. No. 366 of 1975
Reported in(1979)8CTR(All)209
AppellantAdditional Commissioner of Income Tax
RespondentKishore Chand Shiv Charanlal.
Excerpt:
- .....march 3, 1962 in respect of service connections. since these recoveries exceeded the written down value as on april 1, 1962, on amount was deductible towards depreciation. 2. on appeal, the appellate assistant commissioner as well as the tribunal took the view that on april 1, 1962, the written down value of the service connections as calculated according to the provisions of 1922 act have to be taken. thus the value of the service connections for purposes of depreciation had to be fixed at rs. 1,02,776/-. the definition given in the new act was not applicable. 3. at the instance of the commissioner, the tribunal has referred the following question of law for our opinion : "whether, on the facts and in the circumstances of the case, the tribunal was justified in upholding the appellate.....
Judgment:

1. JUDGMENT : Satish Chandra, C.J. - The assessee is a registered firm. It carries on the business of supply of electricity to the town of Budaun. It is governed by the Electricity (Supply) Act, 1948 (Act No. 54 of the 1948). It claimed depreciation allowance on the service connections valued at Rs. 1,02,776/- as on April, 1962. The Income Tax Officer repelled this claim on the ground that for the year 1964-65, the Act of 1961 was applicable. In terms of s. 43(1) read with s. 43(6)(b), written down value of the assets would be the actual cost of the assets to the assessee, reduced by that portion of the cost thereof as has been met directly or indirectly by any other person or authority. The assessee had admittedly recovered a sum of Rs. 1,44,157/- upto March 3, 1962 in respect of service connections. Since these recoveries exceeded the written down value as on April 1, 1962, on amount was deductible towards depreciation.

2. On appeal, the Appellate Assistant Commissioner as well as the Tribunal took the view that on April 1, 1962, the written down value of the service connections as calculated according to the provisions of 1922 Act have to be taken. Thus the value of the service connections for purposes of depreciation had to be fixed at Rs. 1,02,776/-. The definition given in the new Act was not applicable.

3. At the instance of the Commissioner, the Tribunal has referred the following question of law for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the Appellate Assistant Commissioners order allowing depreciation on the basis of the written down value of the service connections being taken at Rs. 102,776/- as on April 1, 1962 ?

4. This very question came up for consideration before a bench of this Court in Commissioner of Income Tax v. Messrs. Saharanpur Electric Supply Co. In that case, the question was in respect of the assessment year 1963-64. This Court held that depreciation to be allowed for assessment year 1963-64 in respect of assets acquired before April 1, 1961 should be determined by a reference to the written down value as determined in accordance with the provisions of sub-s. (1) and (6) of s. 43 of the Income Tax Act, 1961. In substance, they ruled that the provisions of the Act of 1961 were applicable to determination of the amount of the actual cost of the assets. This decision is binding on us. Following it, we answer this question in the negative in favour of the department and against the assessee.

The other question referred to us is :

"Whethser, on the facts fand in the circumstances of the case, the Tribunal was legally correct in holding that the requirements of s. 34(3) were satisfied by the assessee even though an amount equal to 75% of the Development Rebate to be actually allowed was not debited to the Profit & Loss Account of the relevant previous year" ?

5. This point is directly covered by a decision of the Court in Commissioner of Income Tax, Delhi Central v. Modi Spinning & Weaving Mills Co. Ltd., We, therefore, answer this question in favour of the assessee and against the Department.

6. The third question referred to us is :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 5,328/- representing a diversion of Income by reason of overriding obligation created by Statute did not form part of the commercial profits of the assessee and had to be excluded from computation of income".

7. This sum was debited to the Profit & Loss Account towards contribution to the contingency reserves. This was required to be done under statutory provisions. This was clearly a case of diversion of income reason of overriding statutory obligation. This sum hence could not be included in the assessable profits of the firm. This view finds support from a decision of the Kerala High Court in Cochin State Power & Light Corporation Ltd. v. Commissioner of Income-Tax, Kerala. We, therefore, answer this question in the affirmative in favour of the assessee and against the Department. In view of the divided success, the parties will bear their own costs.


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