1963-VIL-32-KAR-DT

Equivalent Citation: [1963] 50 ITR 764

MYSORE HIGH COURT

Dated: 11.07.1963

ESTHURI ASWATHIAH

COMMISSIONER OF INCOME-TAX

Bench

HEGDE J.

By these applications the assessee requires the Appellate Tribunal to refer three questions of law which are said to arise out of the Tribunal's order in I. T. A. Nos. 7606 and 7607 of 1961-62 dated May 31, 1962 (Jaishta 10, 1884) to the High Court of Mysore at Bangalore. Inasmuch as, in our opinion, questions of law do arise out of the Tribunal's order, we accordingly state an agreed case and refer it to the High Court. As one of the questions is common to both these references a consolidated statement of the case is hereby drawn.

The assessee is a Hindu undivided family. It carried on various businesses, among them was the business of plying lorries for hire.

One of the lorries MYS 5424X was purchased new during the accounting year relevant for the assessment year 1952-53 for a sum of Rs 23,769. In that accounting year it ran for 4+ months. The depreciations allowed in regard to this lorry from 1952-53 are as under :

Assessment	Depreciation (Rs.)	Additional	Initial year	depreciation (Rs.)	Depreciation (Rs.)
1952-53	1,981	1,981	1953-54	4,754	4,952
1954-55	2,476	2,476	9,409	9,409	4,754

In the accounting year ending on March 31, 1955, the assessee sold this lorry for Rs 10,000. During this accounting year, it ran for a period of 4+ months only. Income was estimated for this period. The total depreciation allowed was Rs 23,572. The difference between the cost thereon and the depreciation allowed amounted to Rs 197.

The Income-tax Officer assessed the sum of Rs 9,803 representing the difference of the sale proceeds of Rs 10,000 and Rs 197 mentioned above as profit under section 10(2)(vii).

In the accounting year relevant for the assessment year 1956-57, the assessee sold another lorry MR 9087X for Rs 9,000. This was purchased new during the accounting year relevant for the assessment year 1954-55 for a sum of Rs 27,491. It was plied for a part of that year. The depreciation allowed from 1954-55 was as under :

Assessment	Depreciation (Rs.)	Additional	Initial year	depreciation (Rs.)	Depreciation (Rs.)
1954-55	1,432	1,432	1955-56	6,132	6,132

The total depreciation allowed up to the assessment year 1955-56 was Rs 20,626. In the accounting year relevant for the assessment year 1956-57, the lorry ran for 4 5/6th months. No depreciation was allowed because the lorry was sold in the same year.

The difference between the cost price and the depreciation allowed amounted to Rs 6,865. The Income-tax Officer assessed the difference between this figure and the sale price of Rs 9,000 as profit under section 10(2)(vii). The figure assessed by the Income-tax Officer was Rs 2,075. The correct figure would appear to be Rs 2,135.

The assessee appealed, among other things, against the computation of the profit under section 10(2)(vii) in 1955-56 and 1956-57. The contention was that the initial depreciation allowed in respect of the two lorries mentioned above should not be taken into account in arriving at the written down value of the two lorries.

The Appellate Assistant Commissioner rejected this contention. After referring to section 10(2)(vib), he observed that :

" ........initial depreciation is restricted in the sense that the depreciation which is allowed at the time of installation is kept apart and is not deducted in determining the written down value for the subsequent assessments. It certainly forms part of the depreciation allowance and is in addition to the ordinary allowance. But according to the definition of written down value, all depreciation actually allowed has to be taken into consideration which will certainly include initial depreciation as well. Hence in computing the profits under section 10(2)(vii) not only the difference between the sale price and the written down value is taken into consideration but also the initial depreciation which was allowed in the year of installation. "

In the appeal to the Tribunal on this point, it held that :

" The written down value as far as the 2nd proviso to section 10(2)(vii) is concerned is as meant under section 10(5)(b) which says that in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under this Act or any Act or under executive orders issued under the Indian Income-tax Act, 1886. "

The allowance under section 10(2)(via) is also called depreciation. We, therefore, consider that there is no merit in the claim of the assessee for the exclusion of the initial depreciation in arriving at the written down value of the assets for the purpose of computing the profit under section 10(2)(vii).

The question of law common to both the years is :

" Whether the initial depreciation allowed under section 10(2)(via) should be taken into account in ascertaining the written down value for the purpose of computing the profit under section 10(2)(vii) of the Indian Income-tax Act, 1922 ? "

In regard to the assessment year 1955-56 the assessee has raised the following question of law :

" Whether, on the facts and circumstances of the case, the assessment order dated February 29, 1960, and communicated to the assessee on April 4, 1950, is barred by limitation within the meaning of section 34(3) of the Income-tax Act, 1922 ? "

The facts relating to the above are as under :

The accounting year is the year ending March 31, 1955, corresponding to the assessment year 1955-56. This assessment was completed under section 23(3) on February 29, 1960. This assessment order was sent by registered post to the assessee. It was received by the assessee on April 4, 1960.

The assessee appealed to the Appellate Assistant Commissioner against the assessment. It was contended before him that the assessment was barred by limitation on the ground that the assessment order ought to have been made within four years from the end of the assessment year, i.e., within March 31, 1960, that the assessment could be said to have been made only on the date on which the order was communicated to the assessee or the date on which the assessee came to know of the assessment. The decision of the Calcutta High Court in Director of Supplies and Disposals v. Member, Board of Revenue, Government of West Bengal ([1960] 11 S. T. C. 589) was relied upon.

The Appellate Assistant Commissioner rejected this contention observing :

" The wording of section 34(3) is that ' no order of assessment or reassessment shall be made after the expiry of four years from the end of year in which the income, profits or gains were first assessable. The Madras High Court in RM. P. R. Viswanathan Chettiar v. Commissioner of Incometax ([1954] 25 I. T. R. 79), have held that all that the section required was that the assessment of the income and the determination of the tax payable should be completed within that period and that it was not necessary that the terms of the order of assessment should be communicated to the assessee within that period. When there is direct authority under the Income-tax Act itself that it would be sufficient that an order is made before the expiry of four years and that it does not extend to the date of service of the order on the appellant, there does not seem to be any necessity to refer to a decision under a different enactment. Following respectfully the decision of the Madras High Court, I hold that the order of the Income-tax Officer was made well within time and that it is legally valid. "

There was a further appeal to the Appellate Tribunal. The Appellate Tribunal agreed with the Appellate Assistant Commissioner in rejecting the assessee's contention. The order of the Tribunal forms part of the case.

Taking up the second question first the point under discussion is covered by the decision of the Madras High Court in RM. P. R. Viswanathan Chettiar v. Commissioner of Income-tax ([1954] 25 I. T. R. 79). We are in full agreement with that decision as the same accords with the language of section 34(3) of the Indian Income-tax Act, 1922. That section says that an order of assessment or reassessment shall not be made " after the expiry of four years from the end of the year in which the income, profits or gains were first assessable. " In this case, the order in question was made within the period mentioned therein. The grievance of the assessee is that by the time that order was communicated to him, the period stipulated therein had expired. What is of essence in the case is the making of the order and not its communication. Section 34(3) does not speak of any communication. No decision taking a contrary view has been brought to our notice. Sri Srinivasan read to us certain decisions which have held that for the purpose of filing an appeal or revision against an order made the relevant date is the date of the knowledge of the order or the date on which it is communicated. This line of cases are not apposite for our present purpose.

Now coming to the first question, here again the decided cases are against the contention advanced by Sri Srinivasan : see Popular Ltd. v. Commissioner of Income-tax ([1955] 28 I. T. R. 309) and Asoka Mills Co. Ltd. v. Commissioner of Income-tax ([1958] 33 I. T. R. 377). Sri Srinivasan contends that these decisions require reconsideration as they did not notice certain material portions of section 10(2)(vi). The aspects that were considered material by Sri Srinivasan are : (1) that the second part of section 10(2)(vi) does not say " in respect of depreciation " and (2) that if section 10(2)(vi) only dealt with the depreciation allowances, clause (c) of the proviso would have mentioned " the aggregate of all allowances provided under the clause ". Neither of these contentions appears to be sound. Now coming to the main part of section 10(2)(vi) the words " in respect of depreciation " not only governs the first part of that clause but also the second part. It must be remembered that the first part and the second part of that clause are only separated by a colon and not by a fullstop. On a plain reading of section 10(2)(vi) it is clear that that provision deals with the allowances to be given towards depreciation.

Now coming to clause (c) of the proviso, the proviso had to be worded in the manner it has been done because the legislature wanted to include within that proviso not only the depreciation allowances provided under section 10(2)(vi) but also the depreciation allowances provided under clause (via) or under any Act repealed hereby or under the Indian Income-tax Act, 1886 (Act II of 1886).

Hence the ingenious construction tried to be placed by Sri Srinivasan cannot be accepted.

For the reasons mentioned above, our answers to the questions submitted to us are in favour of the revenue ; in other words, our answer to question No. (1) is that the initial depreciation allowed under section 10(2)(via) should be taken into account in ascertaining the written down value for the purpose of computing profits under section 10(2)(vii) of the Indian Income-tax Act, 1922, and our answer to question No. (2) is that, on the facts and circumstances of the case, the assessment order dated February 29, 1960, which was communicated to the assessee on April 4, 1960, is not barred by limitation under section 34(3) of the Indian Income-tax Act, 1922.

The assessee to pay the costs. Advocate's fee Rs 250.