JAWAHAR LAL GUPTA, J. - (1.) WE have two references made by the Tribunal at the instance of the two assessees viz., Shri Ram Nath Jindal and Shri Jagjiwan Kumar. The basic issue is whether depreciation can be deemed to have been granted despite the fact that the assessee had not claimed it during the relevant year ? The following two questions have been referred by the Tribunal for the opinion of this Court : 1. Whether on the facts and circumstances of the case, the Tribunal was right in law in having interpreted the orders passed by the ITO for the asst. yrs. 1980 -81 and 1981 -82 to mean that the depreciation had actually been worked and separately allowed by the ITO for these two years on truck No HRN 345 ? 2.Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the ITO had correctly worked out the profit under S. 41(2) on the sale of truck No. HRN 345 -
(2.) THE relevant facts as disclosed in the statement of the case in respect of one of the cases may be briefly noticed. Mr. Ram Nath Jindal had purchased truck No. HRN 345 in the asst. year 1978 -79 for Rs. 62,000. He had sold for Rs. 64,300 and claimed depreciation @ 30 per cent. This claim was allowed. From the asst. yrs. 1979 -80 to 1981 -82, the assessee did not claim any depreciation. On this basis, the assessee claimed that the written down value of truck No. HRN 345 was Rs. 43,400 (Rs. 62,000 minus Rs. 18,600). Thus, he claimed that the profit was Rs. 20,900 (Rs. 64,300 minus Rs. 43,400). The ITO did not accept this position. It was held that the Department had allowed the depreciation as per rules while completing the assessment proceedings". The assessee filed an appeal. It was dismissed by the AAC. He approached the Tribunal and contended that no depreciation having been claimed during the relevant years, it could not be deemed to have been granted. The Tribunal rejected this contention. Hence, the reference. Mr. Ajay Mittal, counsel for the assessee, contended that the Department has erred in determining the written down value of the vehicles. The assessee having not claimed depreciation for a period of three years, the Department has erred in determining the written down value. Thus, both the questions should be answered in favour of the assessee. On the other hand, Mr. R.P. Sawhney, counsel for the Revenue submitted that the High Court cannot embark upon a reappraisal of the evidence. The reference has to be answered on the basis of the facts as found by the Tribunal.
(3.) 'Depreciation' in its ordinary sense means 'loss of value'. In case of commercial vehicles, the loss usually occurs on account of wear and tear during use. Thus, the legislature has made provision allowing the benefit of depreciation to the assessee "on the written down value at the prescribed rate". Specific provision in this behalf has been made in S. 32 of the Act. It is implicit in the provision that the assessee has to disclose the value of the vehicle and can claim depreciation at the prescribed rate. However, the provision as it exists till today does not provide that depreciation shall be deemed to have been claimed and granted even when the assessee has made no claim in that behalf. To put the matter beyond any shadow of doubt, the CBDT had issued Circular No. 29 -D on 31st Aug., 1965. Paras 2 and 3 are relevant and deserve to be noticed. These read as under : "The Board consider that where it is proposed to estimate the profit and the prescribed particulars have been furnished by the assessee, the depreciation allowance should be separately worked out. In all such cases the gross profit should be estimated and the deductions and allowances including the depreciation allowance should be separately deducted from the gross profit. If it is considered that the net profit should be estimated, it should be estimated subject to the allowance for depreciation and the depreciation allowance should be deducted therefrom. 3. Even where best judgment is made, the above procedure should be adopted provided the required particulars have been furnished by the assessee. The cases where required particulars have not been furnished by the assessee and no claim for depreciation has been made in the return, the ITO should estimate the income without allowing depreciation allowance. In such cases, the estimate of net profit would be naturally higher than otherwise and the fact that the estimate has been made without considering depreciation allowance may be clearly brought out in the assessment order. In such cases, the written down value of depreciable assets would continue to be the same as at the end of the preceding year as no depreciation would actually be allowed in the assessment year." A perusal of the above shows that the depreciation allowance has to be "separately worked out". The assessee has to furnish the "required particulars". In a case where the assessee does not furnish the particulars and makes "no claim for depreciation in the return", the ITO is expected to "estimate the income without allowing depreciation allowance". The circular is based on a simple principle, namely : Depreciation is a benefit. It can be allowed only when claimed. It cannot be 'thrust' upon the assessee. ;