Ajit K.Sengupta, J. - (1.) This is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue. The assessment year involved is 1983-84, the previous year being calendar year 1982.
(2.) The questions referred for our opinion are as follows : "(1) Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 43(6) of the Income-tax Act read with Rule 8(1) of the Income-tax Rules, 1962, the Tribunal was correct in law in holding that for the purpose of computing the written down value of depreciable assets used in tea business only 40 per cent. instead of 100 per cent. of depreciation allowable at the prescribed rate should have to be deducted in the assessee's case ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the provisions of Section 40A(8) of the Income-tax Act, 1961, would not be applicable on current account balances of the shareholders of the assessee-company and as well as that of others ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in concurring with the assessee's claim that only the net interest payable, i.e., after adjusting of interest receipts against the interest payments should be considered for the purpose of the allowance under Section 40A(8) of the Income-tax Act, 1961 ?"
(3.) Shortly stated, the facts relating to the first question are that the assessee-company, engaged in the business of cultivation, manufacture and sale of tea, claimed that since only 40 per cent. of its business income is chargeable to income-tax in terms of Rule 8 of the Income-tax Rules, 1962, read with Section 10(1) of the Income-tax Act, 1961, only 40 per cent. of the depreciation is actually allowed under Section 32 read with Section 43(6)(b) of the said Act. The written down value of the depreciable assets in tea business has to be ascertained by deducting from the cost only 40 per cent. of the depreciation allowable at the prescribed rate. Section 43(6) defines the expression "written down value" and the material part of the said definition is set out below : "43. (6)(b). ... 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depreciation actually allowed to him under this Act, or under the Indian Income-tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force :";