Law:

Section:

Section 43(6) of the Income-tax Act, 1961, read with rule 8 of the Income-tax Rules, 1962 - Written down value - Assessment years 1988-89 to 1991-92 - Whether words 'depreciation actually allowed' as occurring in section 43(6)(b) would mean depreciation actually deducted in arriving at taxable income of assessee - Held, yes - Whether, therefore, in context of composite income, depreciation deducted in arriving at taxable income alone can be taken into account and not depreciation deducted for arriving at composite income - Held, yes - Whether since in cases where rule 8 applies income which is brought to tax as 'business income' is only 40 per cent of composite income, only 40 per cent of depreciation allowed at prescribed rate is required to be taken into account because that is depreciation 'actually allowed' - Held, yes Words and phrases : 'Depreciation actually allowed' as occurring in section 43(6)(b) FACTS The assessee-company was engaged in the business of growing and manufacturing of tea. It raised an additional ground of appeal before the Commissioner (Appeals) that for arriving at the opening 'written down value' of the block of assets, the Assessing Officer had erred in deducting 100 per cent of the depreciation for the preceding year calculated at the prescribed rate, whereas only 40 per cent of the depreciation allowed at the prescribed rate ought to have been deducted. Accordingly, the assessee sought a direction from the Commissioner (Appeals) to the Assessing Officer to determine the 'written down value' in accordance with the provisions of section 43(6)(b) by deducting only 40 per cent of the depreciation computed at the prescribed rate, being depreciation actually allowed. The Commissioner (Appeals) did not agree with the assessee and upheld the order of the Assessing Officer. On second appeal, the Tribunal, following the decision of the Calcutta High Court in the case of CIT v. Suman Tea & Plywood Industries (P.) Ltd. [1993]204 ITR 719/17 Taxman 622, held that since 40 per cent of the assessee's composite income was chargeable under section 28, for the purpose of computing the 'written down value' of depreciable assets used in the tea…

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