PANDHYAN INSURANCE CO. LTD. vs COMMISSIONER OF INCOME-TAX, MADRAS

The Supreme Court held that under Rules 3(b) and 6 of the Schedule to the Income Tax Act, 1922, the Income Tax Officer must allow depreciation without requiring proof of actual depreciation. The Court clarified that 'expenditure' in Rule 6 refers to disbursement and does not include depreciation, which encompasses both actual and notional depreciation. The appeal was allowed, restoring the allowance of depreciation claimed by the assessee for the accounting year 1953, contrary to the High Court's ruling.