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2007(8) Supreme 639
Supreme Court of india
(From Gujarat High Court)
Ashok Bhan & H.S. Bedi & V.S. Sirpurkar, JJ.
G.K. Choksi & Company — Petitioner
versus
Commissioner of Income Tax, Gujarat — Respondent
Appeal (civil) 7486 of 2001
Decided on : 27-11-2007
(1981)2 SCC 693 – Distinguished.
(b)Income Tax Act, 1961 – Section 32(1) – The sub-section lays down general conditions or basic requirements – The various clauses operate on further specific conditions laid down in each individual clause – Clause (ii) is applicable to both business and profession – In clause (iv) the legislature has used the word “business” only, intending to restrict the benefit to the assessees carrying on business only. (Paras 13)
(c)Income Tax Act, 1961 – Section 32(1)(iv) – Interpretation – There is nothing in Section 32(1)(iv) which envisages the scope of word “business” to include in it “profession” as well – If the expression “business” is interpreted to include within its scope “profession” as well, it would be doing violence to the provisions of the Act – Such interpretation would amount to first creating an imaginative lacuna and then filling it up, which is not permissible in law. (Para 18)
(d)Income Tax Act, 1961 – Section 32(1)(iv) – Interpretation – Well settled that if two interpretations are possible, then the one in favour of the assessee should be adopted – In the present case, however, two interpretations are not possible as the word “business” occurring in clause (iv) of Section 32(1), by no stretch of imagination, can be said to include “profession” as well – The contention that Section 32(1)(iv) should be given purposive interpretation to include “profession”, has thus to be rejected. (Para 18)
Facts of the case :
1.The question involved in the present appeal relates to the correct interpretation of Section 32(1)(iv) of the Act and that whether in the facts and circumstances of the present case the assessee-appellant, a Chartered Accountant’s firm would be entitled to deduction under the said section.
2.The assessee is a firm of Chartered Accountants. During the relevant year the appellant constructed a building for the purpose of residence for its low paid employees and claimed initial depreciation under Section 32(1)(iv) of the Act. The Income Tax Officer rejected the claim of the assessee-appellant on the ground that the said provision is applicable to an assessee carrying on “business” and the same is not available to a professional.
3.The Commissioner of Income Tax (Appeals) reversed the order of the I.T.O. and allowed the claim of the appellant with the further direction to the Income Tax Officer to grant initial depreciation @ 40% for the building erected by the appellant for the residential purposes of its employees.
4.Being aggrieved by the order passed by the CIT(A), Revenue filed an appeal before the Income Tax Appellate Tribunal (for short “the Tribunal”). The Tribunal reversed the order passed by the CIT (A) and restored the order passed by the ITO.
5.Aggrieved by the order passed by the Tribunal, the appellant filed a Reference Application under Section 256(1) of the Act before the Tribunal to refer certain questions of law to the jurisdictional High Court for its opinion.
6.The High Court confirmed the order passed by the Tribunal.
Findings of the Court:
The word “business” occurring in clause (iv) of Section 32(1), by no stretch of imagination, can be said to include “profession” as well.
Result : Appeal dismissed.
JUDGMENT
BHAN, J.—
1.The present appeal has been directed against the final judgment and order dated 16th August, 2001 passed by the High Court of Gujarat at Ahmedabad in Income Tax Reference No. 194/86 whereby the High Court has upheld the order passed by the Tribunal to the effect that the assessee was not entitled to deduction under Section 32(1)(iv) of the Income Tax Act, 1961 (for short “the Act”).
2.The question involved in the present appeal relates to the correct interpretation of Section 32(1)(iv) of the Act and that whether in the facts and circumstances of the present case the assessee-appellant, a Chartered Accountant’s firm would be entitled to deduction under the said section.
3.The brief facts are as under:
“The assessee (hereinafter referred to as “the appellant” ) is a firm of Chartered Accountants in Ahmedabad. The Assessment relates to the Year 1984-85 for the financial year ending on 31.03.1984. During the relevant year the appellant constructed a building for the purpose of residence for its low paid employees and claimed initial depreciation @ 40% under Section 32(1)(iv) of the Act amounting to Rs.43,505/- on the actual cost of the building i.e. Rs.1,08,757/-. The Income Tax Officer (ITO) vide its order dated 15.1.1985 rejected the claim of the assessee-appellant on the ground that the said provision is applicable to an assessee carrying on “business” and the same is not available to a professional.”
4.The Commissioner of Income Tax (Appeals) [for short CIT (A)] by its order dated 30.4.1985 reversed the order of the Income Tax Officer relying upon the judgment of this Court in Barendra Prasad Ray V. Income Tax Officer1, 1981 (2) SCC 693, and allowed the claim of the appellant with the further direction to the Income Tax Officer to grant initial depreciation @ 40% for the building erected by the appellant for the residential purposes of its employees.
5.Being aggrieved by the order passed by the CIT(A), Revenue filed an appeal before the Income Tax Appellate Tribunal (for short “the Tribunal”). The Tribunal reversed the order passed by the CIT (A) and restored the order passed by the ITO. It was held that the appellant was not entitled to the relief claimed. That the judgment in Barendra Prasad Ray (supra) was not applicable to the facts and circumstances of the present case. That, Barendra Prasad Ray (supra) was decided by this Court in peculiar facts and circumstances prevailing in that case and the same was restricted to the facts prevalent therein. It was also observed that in the said case, this Court was dealing with another provision, i.e., Section 9 of the Act and the observations made therein could not be applied to the facts of the present case. The Tribunal also noted the difference between the provisions of Section 32(1) and Section 32(1)(iv) of the Act.
6.Aggrieved by the order passed by the Tribunal, the appellant filed a Reference Application under Section 256(1) of the Act before the Tribunal to refer certain questions of law to the jurisdictional High Court for its opinion. The Tribunal referred the following question of law to the jurisdictional High Court for its opinion :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was not entitled to deduction under Section 32(1)(iv) of the Act ?”
7.The High Court by its impugned judgment has confirmed the order passed by the Tribunal and held that the appellant is not entitled to the deduction claimed by it under Section 32(1)(iv) of the Act on the ground that it was a firm of professionals, who do not come within the purview of Section 32(1)(iv) of the Act.
8.The relevant provisions of Section 32 of the Act, as they existed at the relevant time, are reproduced below :
“Section 32 - Depreciation (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
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