Law:

Section:

Section 32 of the income-tax act, 1961, read with income-tax (fourth amendment) rules, 1969-Depreciation-Allowance/rate of-For assessment year 1971-72, assessee claimed 100 per cent depreciation on certain assets in accordance with Income-tax (fourth amendment) rules, 1969, which came into force on 1-4-1970-Expenses on repairs and replacements of these assets had been allowed as revenue expenditure-Whether 100 per cent depreciation was allowable in respect of impugned assets used in relevant year even though said assets were not purchased in that year but in earlier years-Held, on facts, yes. Facts For the assessment year 1971-72, the accounting year ending on 31-12-1970, the assessee claimed 100 per cent depreciation on salt pans, reservoirs and condensers made of earthy material. The expenses on repairs and replacements of these assets had been allowed as revenue expenditure. The ITO disallowed the assessee's claim on the ground that the Income-tax (Fourth Amendment) Rules, 1969, allowing 100 per cent depreciation in respect of these items came into force only on 1-4-1970, and the impugned assets not having been acquired in the relevant previous year, the assessee could not claim depreciation at 100 per cent on the basis of the said amendment. On appeal, the AAC confirmed the ITO's order. On further appeal, however, the Tribunal held that even though the assets had not been acquired during the relevant previous year, the assessee was entitled to claim 100 per cent depreciation on the actual cost of the assets based on the Fourth Amendment Rules. On reference: Held In the instant case, the cost of repairs and replacements, which the assessee wanted to capitalise had been treated as revenue expenditure. Therefore, there was only the actual cost of the assets on which 100 per cent depreciation had to be allowed if no depreciation had been claimed in the earlier years. In this view of the matter, the Tribunal was right in holding that the date of acquisition of the assets was immaterial but their actual use in the previous year was the criterion for allow ability of the depreciation at 100 per cent. JUDGMENT RAMANUJAM, J.- The following three questions of law…

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