SUMMARY OF CASE LAW
The Full Bench was constituted to consider whether for the purposes of allowing deduction under Ch. VI-A depreciation could be thrust on the assessee even though it had disclaimed the same for purposes of regular assessment. The assessee argued that as in accordance with Mahendra Mills 243 ITR 56 (SC), depreciation was optional and as Expl. 5 to s. 32 came into force only from AY 2002-2003, depreciation could not be thrust even for purposes of Ch. VI-A. HELD, deciding against the assessee:
(i) Mahendra Mills 243 ITR 56 has to be understood in the context in which the said decision was rendered. The decision was rendered in the context of determining total income under Ch. IV and not in the context of determining the deduction under Ch. VIA. Mahendra Mills has not laid down any proposition of law that by disclaiming depreciation, the assessee can claim enhanced deduction allowable under any other provision in the Act.
(ii) The fact that the assessee may have an option to disclaim current depreciation in computing total income under Ch. IV does not mean that the quantum of deduction allowable u/s 80 – IA is dependent upon the assessee claiming or not claiming current depreciation.
(iii) Ch. VI-A is a Code by itself and the special deduction granted therein has to be computed on the gross total income determined after deducting all deductions allowable under ss. 30 to 43D and any device adopted to reduce or inflate the profits of eligible business has got to be rejected. By not claiming current depreciation, the assessee seeks to inflate the profit linked incentives provided u/s 80-IA which is not permissible.
Note: The judgement of the Special Bench in Vahid Paper Mills 98 ITD 165 (SB) (Ahd) is impliedly approved.
See Also: Dabur India Ltd vs. CIT (Delhi High Court) where the same view was taken.