IMPORTANT POINT
Depreciation claims cannot be imposed on an assessee if not claimed, and deductions under sections 80HHC and 80IA cannot exceed the profits of the eligible business.

JUDGMENT :

Bhargav D. Karia, J.

1. This Tax Appeal is filed by the appellant- assessee under section 260A of the Income Tax Act,1961 [for short ‘the Act’] arising out of the order of the Income Tax Appellate Tribunal [for short ‘the Tribunal’] in ITA No. 3528/AHD/2004 for A.Y.2001-02.

2. This Court [Coram: Hon’ble The Chief Justice Mr. K.S.Radhakrishnan and Hon’ble Mr. Justice Akil Kureshi] by order dated 30.06.2009, admitted the Tax Appeal on the following substantial questions of law:

“1. Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that depreciation, whether claimed or not, has to be foisted upon the assessee even prior to insertion of Explanation 5 to S.32(1) of the Act with effect from 1.04.2002, while calculating deduction under Chapter VIA of the Act?

2. Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that depreciation, whether claimed or not, on notional basis is required to be reduced from the profit of eligible industrial undertakings for the purpose of calculating deduction under Chapter VIA of the Act in spite of the fact that the new scheme of depreciation of block of assets does not provide for computation of depreciation on cost of individual asset?

3. Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming that the export profits earned and claimed as deductible u/s. 80 HHC includes profits earned by the New Industrial Units(whose profits are eligible for deduction u/s.80IA and 80IB of the Act)?

4. Whether, in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in not allowing deduction u/s.80HHC as well as 80IA of the Act on the same gross total income without reducing each other?

5. Whether, in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in not allowing deduction u/s.80IA of the Act on the New Power Plant by not treating the same as a new industrial undertaking within the meaning of provisos of S.80IA of the Act?”

Question Nos.1 and 2

3. Question Nos.1 and 2 are regarding claim of depreciation at the discretion of the assessee prior to insertion of Explanation 5 to section 32(1) of the Act w.e.f. 01.04.2002 and whether such depreciation if not claimed, then notionally required to be reduced from the profit of eligible industrial undertaking for the purpose of calculating deduction under Chapter VI-A of the Act or not. Therefore, question No.1 is re-framed as under:

1. Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that depreciation, whether claimed or not, has to be foisted upon the assessee even prior to insertion of Explanation 5 to S.32(1) of the Act with effect from 1.04.2002?

4. Question No. 1 is no more res integra in view of the decision of the Hon’ble Apex Court in case of ACIT vs. G.E.Lighting (I.)(P.) Ltd reported in 454 ITR 285 wherein the decision of this Court is and held as under:

“4. As can be seen from the impugned order of the Tribunal, the Tribunal has recorded that it is not in dispute as the assessee had filed revised return and withdrawn its claim for depreciation of Rs. 15,02,72,234/-. The Tribunal placed reliance upon a decision of the Kerala High Court wherein it was held that Explanation 5 added to section 32(1) by the Finance Act would take effect from 1st April 2002 and subsequent years. That as in the facts of the said case, the assessee had not made a claim or requested for allowance of depreciation, Assessing Officer was not justified in allowing the depreciation for the assessment year 1989-90. The Tribunal also placed reliance upon a decision of the Punjab & Haryana High Court in Beco Engineering Co. Ltd. v. CIT [1984] 18 Taxman 44/148 ITR 478, wherein it was held that the claim for depreciation can be withdrawn by filing revised return. The