Case Law Details

Case Name : DCIT Vs Sun Pharmaceuticals Ltd (Gujarat High Court)
Appeal Number : Tax Appeal no. 93 of 2000
Date of Judgement/Order : 17/12/2014
Related Assessment Year :
Courts : All High Courts (4748) Gujarat High Court (415)

Whether, the Appellate Tribunal is right in law and on facts in holding that depreciation not claimed for by the assessee, cannot be allowed as a deduction despite the introduction of the concept of block assets ?”

As far as this aspect is concerned, the finding of fact recorded by the CIT(Appeals) which reads as under:

“3. The contentions of the appellant and the reasons given by the Assessing Officer in allowing full depreciation are considered. The decision of CIT v. Mother India Refrigeration (P) Ltd. (Supreme Court) relied on by the assessing Officer is not applicable in the instant case as the issue as to whether depreciation is optional or not was never before the Supreme Court. The second decision of Madras High Court in the case of Dasa Prakash Bottling Co. v. CIT  will also not be applicable as the Gujarat High Court,which is jurisdictional High Court in the case of CIT v. Arun Textiles 192 ITR 700 did not agree with this decision. In the case of Arun Textiles (supra), the Gujarat High Court held that there is nothing in the provisions of section 32(1) read with section 29 of the Income-tax Act, 1961, to indicate that even when no claim is made for allowing deduction in respect of the depreciation under section 32(1), the Income-tax Officer is bound to allow a deduction. Under the scheme of the Act, income is to be charged regardless of depreciation on the value of the assets and it is only by way on an exception that section 32(1) grants an allowance in respect of depreciation on the value of the capital assets enumerated therein. There is intrinsic evidence under section 43(6) (b) of the Act in the expression “less all depreciation actually allowed” to show that it is not as if all allowable deductions are to be granted by the Income-tax Officer even when the assessee does not want the same. Sub‑ section (2) (a) of Section 143(3) of the Act provides that an assessee can object to such deduction made under section 143 (1) . Therefore, the assessee can come forward in such a case and make clear its intention that it does not want to compute depreciation on the assets and wants no benefit of claiming any depreciation in respect thereof. The Circular of CBDT 29 D (XIX-4) of 1965 (F. No. 45/239/65-ITJ), dated 31.8.1996) directed that, “where the required particulars have not been furnished by the assessee and no claim for depreciation has been made in the return, the Income-Tax Officer should estimate the income without allowing depreciation allowance.” Respectfully following the decision of the Gujarat High Court, I hold that the depreciation is optional to the assessee and once he chooses not to claim it, the Assessing Officer cannot allow it while computing the income. Further, once the depreciation is option, applying the same ratio of Gujarat High Court and other Courts, it will be optional for block of assets also. It is not necessary that the depreciation is allowable not allowable as a whole. The assessee can claim it partly also in respect of certain block of assets and not claim in respect of other block of assets. I, therefore, direct the Assessing Officer to withdraw depreciation allowance of Rs. 85,24,227/- not claimed by the appellant.”

The Tribunal has upheld the well reasoned finding of CIT (Appeals) in computing and analyzing the gross business profit.

The fact that the Tribunal and the CIT(A) have concurred, we are not persuaded to take a different view then that taken by both the authorities below as the orders are neither perverse nor against settled legal proposition of law on the contrary they are based on correct interpretation of law and decisions of Apex Court and this Court.

We hold that (1) that the Appellate Tribunal is right in law and on facts in allowing the deduction u/s. 80HHC and 80IA on gross total income inclusive of income from other sources. As far as newly added question is concerned, there also we hold that the the Appellate Tribunal is right in law and on facts in holding that depreciation not claimed for by the assessee, cannot be allowed as a deduction despite the introduction of the concept of block assets. The questions are answered in favour of assessee and against the Revenue. The Tax Appeal stands dismissed.

(Compiled & Analysed by CA Sandeep Kanoi)

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