Brief of the case:
The Hon’ble Himachal Pradesh High Court in the case of CIT vs. M/s Shree Triveni Foods held that the claim of depreciation for assessment years under dispute was not mandatory and therefore, the assessee could not be compelled to exercise the option as an obligation. Is is further held that Claim of depreciation been mandatory only on or after Assessment Year 2002-03 by way of inserting Explanation 5 to Sec 32(1)(ii) and same is not retrospective.
Facts of the case:
- For the assessment year 2000-01 to 2004-05, the assessee filed returns of income claiming the entire profits as deduction under Section 80IB of the Income Tax Act, 1961.
- The case of the assessee was reopened u/s 147 for AY 20001-01 and 2002-03. The Assessing Officer also concluded that though the assessee had not claimed depreciation in assessment year 2000-01 and 2001-02, the same should be allowed while computing the eligible profits.
- Aggrieved by the order of CIT, assessee appealed before ITAT who held that the claim of depreciation is mandatory only w.e.f AY 2002-03 because the explanation 5 inserted to sec 32(1) was effective from AY 2002-03 and it cannot have retrospective effect to AY 2000-01 and AY 2001-02.
- Aggrieved by the said order, revenue is in appeal before High Court.
Contention of Assessee:
The depreciation was not claimed on fixed assets so as to claim higher deduction under Section 80IB. Assessee had an option to claim depreciation but it had not exercised that option. Revenue, thus, cannot compel assessee to exercise that option as an obligation.
Contention of Revenue:
