| Headnote |
Income Tax Act, 1961 : Section 43-Depreciation on service lines for Assessment Year 1962-63-Computation of-Written down value-Determination of Interpretation of Statutes-Retrospective interpretation of a statute- When arises. Under the Indian Income-tax Act, 1922, while computing the income from business, an assessee was entitled to an allowance of depreciation at a percentage of the actual cost to the assessee or the written down value of the relevant asset owned by him, and used for the purposes of business. This Act was replaced by the Income-tax Act, 1961 Under both the Acts, 'written down value' was defined with reference to 'actual cost'. Initially between 1922 and 1952, the expression 'actual cost' was defined to mean just the actual cost of the asset to the assessee. However, consequent on the decision of some of the High Courts that in ascertaining the actual cost of an asset to the assessee, it was immaterial that someone else had recouped the assessee, wholly, or in part, towards such cost, the 1922 Act was amended by the Income-tax Amendment Act of 1953, with effect from 1.4.1952, nullifying the effect of the aforesaid decision, and permitting only a limited exclusion. The Income-tax Act, 1961, however, directed the exclusion in the computation of the actual cost, of all amounts reimbursed to the assessee by any person whatsoever. The appellants in the appeals before this Court were all electric supply undertakings in various parts of the country. They had installed service connections during the relevant previous year to the assessment year 1962-63. A part of the expenditure incurred in connection with the installation of these lines was recovered by the companies from consumers of electricity. They claimed that the depreciation to be allowed for the assessment year 1962-63 and thereafter on the service connections installed in the previous years should be based only on the actual cost and written down value determined earlier, and there was no justification in disturbing the same. However, the Revenue was of the view that though the assets had been acquired in earlier previous years, the statutory mandate,of Section 43(6) (b) was that the actual cost should be determined afresh for each assessment year and this, for assesssment year 1962-63 onwards, could only be in accordance with the definition contained in the 1961 Act. Accordingly, it ignored the written down value of the assets as per the earlier record, computed the actual cost of the service lines by excluding therefrom the contributions of consumers, but gave credit thereafter for all depreciation allowed in respect thereof (on the basis of the higher actual cost as then determined) in all the earlier years. On appeal by the assessees, the concerned High Courts upheld the view of the Revenue and held that the actual cost of all assets for purposes of assessment year 1962-63 and onwards, whatever might have been the date of acquisition of the assets, had to be Computed in accordance with the new formula laid down by the Income-tax Act, 1961. In the appeals before this Court, on behalf of the assessee companies it was contended that the interpretation of the Revenue approved by various High Courts, would result in absurdities and anomalies, that the figure of the actual cost ascertained in respect of any asset in any of the earlier previous years could not be altered in a subsequent years that both the 1922 Act as well as the 1961 Act envisaged a continuance of the figure of actual cost once arrived at in respect of any plant or machinery, throughout the life-time of such plant or machinery, that for the assessment year 1962-63, the question of determination of actual cost could arise only in respect of assets acquired during the relevant previous year under clause (a) of s.43(5), and so far as the assets which had been acquired in earlier previous years were concerned, depreciation had to be calculated on the basis of the written down value, and since the written down value in respect of these assets had already been ascertained for the assessment year 1961-62, all that bad to be done further, to find out the written down value for the assessment year 1962-63, was to deduct therefrom the depreciation allowed for the assessment year 1961-62. It was further contended that though the actual cost as determined for the earlier years was not sacrosanct or untouchable and there may be circumstances in which it may have to be modified in the light of subsequent events, and changes in actual cost could be taken into account for purposes of the definition in s.43 (1) read with sub. sec. (6), in certain situations, the actual cost could not be altered merely because a subsequent legislation provided for a different formula for as certainment of actual cost, and that formula could not be retrospectively made applicable to assets which had been acquired much earlier and the actual cost of which had already been determined in accordance with the earlier prevalent law, that the legislation could not be given retrospective effect so as to affect existing rights, unless the legislation stated so expressly or by necessary implication, that there was an indication in the language of Section 43(6) itself to show that it was available to be invoked only in respect of assets which bad been acquired in earlier years, and that if the intention had been that the actual cost of assets which had been acquired earlier to the previous year should also be covered, the legislature would have used the words "as had been met" that the Revenue's interpretation may lead to the computation of a negative written down value and consequent difficulties in applying various other statutory provisions, and that it was also in- compatible with the terms of Explanations 2, 4 and 6 to Section 43(6), and would also lead to difficulties in the calculation of assessable profits ... under Section 41(2) or the allowance under Section 32(i)(iii). |
