This is a reference under Section 66(1) of the Income-tax Act at the instance of the Commissioner of Income-tax, Bengal.
The question relates to the allowable depreciation for the charge year 1942-43.
In the preceding charge year (1941-42), the allowable depreciation was found to be Rs. 87,244. The written down the value was Rs. 9,08,003. In that year, there was resultant loss, even without taking into consideration the depreciation allowance. The deprecation allowance of Rs. 87,244 was carried forward to the charge year 1942-43 as unabsorbed depreciation.
A question arose whether the written done value of the assets for the purpose of allowing depreciation in the charge year 1942-43 should be taken to be Rs. 9,08,003 less Rs. 87,244 of Rs. 9,08,003. The Income-tax authorities contend for the former figure, the assessee for the latter.
It is no longer disputed that the present controversy should be determined on the terms of section 10(5)(b) as amended by the Income-tax (Amendment) Act (XXIII of 1941) which is to the following effect :-
'10(5) written down the value means -
(b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him undder this Act, or any Act repealed thereby, or under exculative orders issued when the Indian Income-tax Act, 1886, was in force.'
Mr. Pal, appearing for the Income-tax authorities, contends that the expression 'actually allowed' means 'allowable under the law in force.' Mr. Pal refer us to the provisions of section 10(2)(vi), provisions (b) and (c), of Act XI of 1922 and also to the corresponding provisions of Act VII of 1939. Mr. Pal suggests that the amendment of 1941 has reference only to the extend of the allowance and not to the question whether the allowance was given effect to or not.
In our opinion, the contentions are without substance.
The words 'actually allowed' are unambiguous and cannot the idea that the allowance was in fact given effect to.
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.
In the present case, as there was loss, the depreciation allowance of Rs. 87,244 was not set off and cannot be said to have been actually allowed.
In our opinion, the Tribunal was eight in holding that in determining for the 1942-43 assessment, the written down value of the assets as brought forwards on January 1, 1941, the allowance depreciation of Rs. 87,244 to which effect could not be given by reason of th ere being no profits in the preceding year, was not depreciati on 'actually allowed' within the meaning of Section 10(5)(b) of the Act as amended in 1941. The answer to the question referred is therefore in the affirmative.
The assessee, Kamalm Mils Ltd., Calcutta, is entitled to the costs of this reference, 20 gold mohurs.
Reference answered in the affirmative.