Law: Income Tax Act, 1922

Section: 10(2)(vii)

Law: Income Tax Act, 1922

Section: 10(2)(vii)

Section 41(2) of the Income-tax Act, 1961 [Corresponding to section 10(2)(vii) of the Indian Income-tax Act, 1922] - Balancing charge - Assessment years 1949-50 to 1951-52 - Whether accounts maintained by assessee are defective, in sense that they do not lead to a correct assessment of income, profits and gains of business, has nothing whatever to do with allowance that can be granted under section 10(2)(vii) of 1922 Act - Held, yes - Assessee was plying buses and had been submitting income tax return by estimating income at a flat rate per bus and a regular day book and ledger had not been maintained - However he maintained 'buses valuation book' in which value of vehicle was recorded and entry had been made in respect of condemned vehicles wiping out relevant entry - Whether accounts maintained by assessee was sufficient to allow assessee obsolescence allowance in respect of condemned vehicles - Held, yes Words and phrases: Expression "books of the assessee' as occurring in section 10(2)(vii) of the Indian Income-tax Act, 1922. FACTS The assessee was operating a bus transport business as sole proprietor from the 1-4-1948. For the accounting periods, relevant to the assessment years 1949-50, 1950-51 and 1951-52, the assessee claimed obsolescence allowance under section 10(2)(vii) of the 1922 Act in respect of the buses scrapped. The written down value of scrapped buses was claimed as allowance. The ITO, however, estimated the scrap value at 25 per cent of the written down value and accordingly reduced the amount of allowance. On appeal, the AAC held that the allowance granted under section 10(2)(viii) of the 1922 Act was improper and he accordingly directed the adding back of the allowance to the income. On second appeal, the Tribunal took the view that in order to qualify for this allowance, it was mandatory that the sum in question should have been written off in the books of the assessee. The Tribunal was of the view that this requirement contained in the proviso to section 10(2)(viii) was intended by the legislature to restrict the relief only to cases where an assessee maintains regular books of accounts. The Tribunal thought that as the assessee never…

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