- (1.) DELAY condoned.
(2.) LEAVE granted. This batch of civil appeals is directed against judgments dated 22. 11. 06 and 8. 1. 07 of the High Court of Guwahati, Assam, in appeals under Section 260a of the income-tax Act, 1961 in respect of assessment years 1988-89, 1989-90, 1990-91 and 1991-92. What is the meaning of the expression "depreciation actually allowed" in Section 43 (6) (b) of the 1961 Act (as it stood at the relevant time)? How is the depreciation to be computed in cases falling under Rule 8 of the income-tax Rules, 1962, which deals with taxability of composite income? These are the two questions which arise for determination in this batch of civil appeals. Background facts in Civil Appeal No. of 2009 (Arising out of SLP (C) No. 13070 of 2007)
(3.) THE facts in all these civil appeals are similar. Respondent- assessee, at the relevant time, was in the business of growing and manufacturing of tea. In this case we are concerned with the assessment year 1988-89. Applicability of Rule 8 is not in dispute. Assessee raised additional grounds before cit (A) at the time of hearing of the appeal inter alia stating that the AO had erred in determining the opening "written down value" of the block of assets without following the provisions of Section 43 (6) (b) of the 1961 Act. According to the assessee for arriving at the opening "written down value" of the block of assets, the AO erred in deducting 100 per cent of the depreciation for the preceding year calculated at the prescribed rate from the opening "written down value". However, the assessee claimed that only 40 per cent of the depreciation allowed at the prescribed rate ought to have been deducted and not 100 per cent as done by the AO. In this connection reliance was placed by the assessee on section 43 (6) (b) of the 1961 Act. Accordingly, by additional grounds which were allowed to be raised, the assessee sought a direction from CIT (A) to the AO to determine the "written down value" in accordance with the provisions of Section 43 (6) (b) by deducting only 40 per cent of the depreciation computed at the prescribed rate, being depreciation actually allowed. This argument of the assessee came to be rejected by CIT (A ). Aggrieved by the decision, the assessee carried the matter in appeal to the Tribunal. By its decision the Tribunal, following the decision of the Calcutta High Court in the case of Commissioner of Income-tax v. Suman tea and Plywood Industries (P) Ltd. [1993 (204) ITR 719], held that since 40 per cent of the assessee's composite income is chargeable under Section 28 of the 1961 Act, for the purposes of computing the "written down value" of depreciable assets used in the tea business, only 40 per cent instead of 100 per cent of depreciation allowable at the prescribed rate shall be deducted in the case of the assessee. This view of the Tribunal has been affirmed by the impugned judgment of the High Court. Hence this civil appeal (s) by way of special leave petition (s) is filed by the department. Answer to Question No. (1) -meaning of the expression "depreciation actually allowed" in Section 43 (6) (b) of the 1961 Act;