Very important points
1. Provision for claim of depreciation under Section 32 of the Income Tax Act is certainly for the benefit of the assessee. If it does not wish to avail that benefit for some reason, benefit cannot be forced upon him. It is for the assessee to see if the claim of depreciation is to his advantage.
2. If the revised return is a valid return and the assessee has withdrawn the claim of depreciation it cannot be granted relying on the original return when the assessment is based on the revised return.

Headnote:Income Tax Act, 1961—Section 82—Depreciation—Condition precedent of grant—Deduction could be allowed only if prescribed particulars have been furnished by assessee—If assessee does not wish to avail benefit for some reason benefit cannot be forced upon him—When assessee does not claim depreciation Assessing Officer cannot allow depreciation contrary to option of assessee not to claim same—If claim is withdrawn by filing valid revised return depreciation cannot be granted relying on original return.
       Held : Language of the provision of Sections 32 and 34 are specific and admits of no ambiguity. Section 32 allows depreciation as deduction subject to the provisions of Section 34. Section 34 provides that deduction under Section 32 shall be allowed only if prescribed particulars have been furnished. We have seen Rule 5AA of the Rules which though since deleted provided for the particulars required for the purpose of deduction under Section 32. Even in the absence of Rule 5AA return of income in the form prescribed itself requires particulars to be furnished if the assessee claims depreciation. These particulars are required to be furnished in great detail. There is a circular of the Board dated August 31, 1965, which provides that depreciation could not be allowed where the required particulars have not been furnished by the assessee and no claim for the depreciation has been made in the return. Income-tax Officer in such a case is required to compute the income without allowing depreciation allowance. Circular of the Board dated April 11, 1955 is of no help to the Revenue. It imposes merely a duty on the officers of the department to assist the tax-payers in every reasonable way, particularly, in the matter of claiming and securing relief. The Officer is required to do no more than to advise the assessee. It does not place any mandatory duty on the officer to allow depreciation if the assessee does not want to claim that. Provision for claim of depreciation is certainly for the benefit of the assessee. If it does not wish to avail that benefit for some reason, benefit cannot be forced upon him. It is for the assessee to see if the claim of depreciation is to his advantage. Rather Income-tax Officer should advise him not to claim depreciation if that course is beneficial to the assessee. That would be in our view the spirit of the circular dated April 11, 1955. Income under the head "profits and gains of business or profession" is chargeable to income-tax under Section 28 and that income under Section 29 is to be computed in accordance with the provisions contained in Sections 30 to 43A. The argument that since Section 32 provides for depreciation it has to be allowed in computing the income of the assessee cannot in all circumstances be accepted in view of the bar contained in Section 34. If Section 34 is not satisfied and particulars are not furnished by the assessee his claim for depreciation under Section 32 cannot be allowed. Section 29 is thus to be read with reference to other provisions of the Act. It is not in itself a complete code. (Para 37)
       If the revised return is a valid return and the assessee has withdrawn the claim of depreciation it cannot be granted relying on the original return when the assessment is based on the revised return. (Para 38)

Judgment

D.P. Wadhwa, J.—A common question of law arises in these appeals. It is :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in coming to the conclusion that the Income-tax Officer could not grant depreciation allowance to the assessee under the Income-tax Act, 1961 when the same was not claimed by the assessee?"

2. The question was referred at the instance of Revenue to the High Court by the Income Tax Appellate Tribunal (‘Tribunal’ for short) for its opinion and answered in affirmative in favour of the assessee and against the Revenue.

3. This question has been answered differently by various High Courts one in favour of the assessee and the other in favour of the Revenue.

4. Section 32 has since been amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from 1.4.1988. However, the answer to the question remains of substantial importance as various matters are stated to be pending in the High Courts relating to Assessment Years prior to 1.4.1988. Section 32 as it stood prior to 1.4.1988, in relevant part, is as under :

"32. (1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of Section 34, be allowed—

(i) .....

(ii) In the case of buildings, machinery, plant or furniture, other than ships covered by clause (i), such percentage on the written down value thereof as may in any case or class of cases be prescribed:

Provided that where the actual cost of any machinery or plant does not exceed seven hundred and fifty rupees, the actual cost thereof shall be allowed as a deduction in respect of the previous year in which such machinery or plant is first put to use by the assessee for the purposes of his business or profession :

Provided further that no deduction shall be allowed under this clause or clause (iii) in respect of any motor-car manufactured outside India, where such motor-car is acquired by the assessee after the 28th day of February, 1975, and is used otherwise than in a business of running it on hire for tourists."

"32(2) Where, in the assessment of the assessee (or, if the assessee is a registered firm or an unregistered firm assessed as a registered firm, in the assessment of its partners), full effect cannot be given to any allowance under clause (i) or clause (ii) or clause (iia) or clause (iv) or clause (v) or clause (vi) of sub-section (1) or under clause (i) of sub-section (1A) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of Section 72 and sub-section (3) of section 73, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years."

We may also quote Sections 28 and 29 :

"28. The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession"—

(i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year;

(ii) any compensation or other payment due to or received by,—

(a) any person, by whatever name, called, managing the whole or substantially the whole of the affairs of an Indian company, at or in connection with the termination of his management or the modification of the terms and conditions relating thereto;

(b) any person, by whatever name called, managing the whole or substantially the whole of the affairs in India of any other company, at or in connection with the termination o

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Judicial Analysis

gpt-4

2000 Supreme(SC) 600

Cases Referred (8)

Judicial Analysis