Law:

Section:

Section 32(1)(iii) of the income-tax act, 1961-Depreciation-Balancing allowance-Whether confiscation of imported car would amount to car's demolition or destruction within the meaning of section 32(1)(iii) so as to entitle assessee to deduction of its written down value-held, on facts, no Facts The assessee purchased a car which was confiscated by the customs on the ground of its unauthorised import into India. The assessee was, however, not aware that the car was liable to confiscation. For the assessment year 1965-66, the assessee wrote off an amount of Rs. 24,390 being the written down value of the car and claimed deduction of this amount under section 32(1)(iii). The ITO disallowed the claim on the ground that when the car was confiscated, it could not be said that it was either sold, discarded or demolished as contemplated in section 32(1)(iii). The AAC accepted the assessee's claim on the ground that the confiscation amounted to either demolition or destruction of the said car. The Tribunal reversed the AAC's order. On reference: Held The word 'confiscation' in the relevant context means appropriation to public treasury by way of penalty or seizure by authority, and thus there is no question of demolition or destruction of any asset when it is confiscated. In the circumstances, clause (iii) of section 32(1) could not be extended so as to include the present case of confiscation and the deduction claimed was rightly disallowed by the Tribunal. Editor's note 1. As for the assessee's contention that when the car was confiscated, the asset was lost to the assessee and this loss must be taken into account in computing the taxable income of the assessee, the High Court expressed its inability to go into this contention as this was not covered by the question referred. However, the Court observed that it may be open to the assessee to raise this contention when the matter went back to the Tribunal. 2. Another question referred to the High Court was as follows: "Whether, on the facts and in the circumstances of the case, for the purpose of abatement in tax to be allowed in India with reference to the 'excess' in terms of article 1V-A of the Agreement for the…

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