The main legal point established in the judgment is that the assessee has the choice to claim or forgo the deduction in respect of depreciation under section 32 of the Income-tax Act, 1961, and the Income-tax Officer is not bound to allow the deduction if the prescribed particulars are not furnished.

JUDGMENT :

R.K. Abichandani, J.

The assessee-firm, in the original return of income for the assessment year 1973-74 filed on June 14, 1973, had claimed depreciation on machinery of Rs. 53,057. In its revised return filed on March 13, 1975, the said claim of depreciation was withdrawn. The Income-tax Officer had, under an assessment order made under section 143(3) of the Income-tax Act, 1961, while noticing that in the revised return of income the assessee had not claimed depreciation, allowed the depreciation which was claimed in the original return on the ground that it was not necessary for allowing the depreciation that the factory should work full-fledged and further that the assessee had provided for the depreciation in the account books. The assessee challenged this order in appeal on the ground that it was open to the assessee not to claim the deduction, and since the deduction was not claimed in the revised return, there was no occasion for the Income-tax Officer to allow the same. The Appellate Assistant Commissioner, adopting the reasons contained in the decision of the Allahabad High Court in Ascharajlal Ram Parkash v. CIT, 1973 (90) ITR 477, to the effect that depreciation was a statutory charge and the correct profit cannot be computed without allowing depreciation, upheld the order of the Income-tax Officer in allowing depreciation to the assessee. The assessee challenged the said order before the Income-tax Appellate Tribunal which held that there were two courses open to the assessee, one, of claiming depreciation allowance in which event it would be charged tax on a higher amount of balancing charge and, two, of forgoing the claim for depreciation, the result of which would be that the tax payable on the balancing charge would be less. The Tribunal found that it was open to the assessee to pursue the course which leaves it with a lighter burden particularly when there was no effect on the profits and gains which were required to be determined for the year under reference. The Tribunal found that it was open to the assessee to reduce the incidence of tax by forgoing the claim for deduction though, in law, it may be entitled to the same. The Tribunal, therefore, accepted the assessee's contentions as regards the withdrawal of the claim for depreciation allowance and partly allowed the appeal.

2. In the above background, the Tribunal has referred to us the following two questions under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the said Act") :

"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the assessee was entitled to withdraw the claim for depreciation of Rs. 53,057 by a revised return ?

(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that two courses were open to the assessee, the one being to allocate amongst the partners the loss which it had suffered and the other being to claim the depreciation and any course which is beneficial to the assessee could be adopted and the incidence of tax can be legitimately reduced ?"

3. At the hearing of this reference, it was felt that question No. 2 does not correctly bring about the controversy involved and it needs to be recast as under :

Question No. 2. "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that two courses were open to the assessee, one being to claim depreciation and the other being to forgo the depreciation and any course which is beneficial to the assessee could be adopted and the incidence of tax can be legitimately reduced ?"

4. It was contended by learned counsel, Mr. B. J. Shelat, on behalf of the Revenue that, having regard to the scheme of the Act more particularly to the provisions of sections 28, 29, 32 and 34, it was clear that there was a statutory duty cast on the Income-tax Officer to arri