Income Tax Appellate Tribunal - Delhi
Weston Leasing And Finance (P) Ltd. vs Assistant Commissioner Of Income-Tax on 4 April, 1991
Equivalent citations: [1991]37ITD506(DELHI)
ORDER
P.J. Goradia, Accountant Member
1. This appeal arises from the order dated 19-7-1989 in Appeal No. 391/88-89 passed by the Commissioner of Income-tax (Appeals)-V, New Delhi (Miss Moksh Mahajan) and the ground raised is against rejection of the claim for unabsorbed depreciation of the earlier year.
2. The assessee's accounting year ends on 31-10-1985. For assessment year 1986-87 the assessee had declared nil income. The statement of income reflected following position :-
Loss as per profit & Loss A/c.: Rs. 17,633.25
Add : Depreciation separately considered Rs. 17,153.00
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Business Loss Rs. 500.25
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Depreciation of Rs. 17,153 is to be carried forward.
For assessment year 1987-88 together with return of income the statement of income showed following position :-
Profit as per Profit/Loss Rs. 26,916
Less : Unabsorbed Depreciation for
Assessment year 1986-87 Rs. 17,153
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Rs. 8,763
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3. The assessing officer rejected the claim for unabsorbed depreciation of assessment year 1986-87 observing that the said return was filed on 3-2-1988 as against the due date of 30th June, 1986 and the same was treated as non est under Section 139(10) of the Act, consequently carry forward of depreciation of Rs. 17,153 was also not allowable since the same was not determined in regular assessment. The Commissioner (Appeals) confirmed the decision because, according to her, before depreciation could be carried forward under Section 32(2) of the Act, the same had to be computed and the quantum of depreciation was required to be determined and since the whole process had not been gone through in assessment year 1986-87, there was no question of carry forward of the depreciation.
4. The representatives of both the sides were heard. In my opinion, the assessee's claim is required to be accepted. The assessee's claim for depreciation is under Section 32( 1) of the Act. That was not allowed or full effect could not be given owing to there being no profits or gains chargeable for that year. Now in this case the tax authorities invoked the provisions of Section 139(10) of the Act for the purpose of treating the return of income for assessment year 1986-87 as the return never filed. But this could be done only on the basis when a return of income showed the total income below the maximum amount which is not chargeable to tax. Therefore, while invoking the provisions of Section 139(10) the assessing officer did take into consideration the statement of income filed for assessment year 1986-87. This statement reflects that even before the allowance of that year's depreciation, the assessee incurred business loss of Rs. 500 and that is why the return was treated as non est. In this process the assessing officer accepted the position that full effect could not be given to the depreciation allowance of Rs. 17,153 in assessment year 1986-87 and, therefore, requirements of Section 32(2) got complied with. This amount of depreciation for assessment year 1986-87 had to be considered under Section 32(1) of the Act because of the specific language of Section 32(2) of the Act. Therefore, the assessee's claim could not be rejected on the ground taken by the tax authorities. Even otherwise since the claim was made for the depreciation allowance in the current year not only in respect of the current year's depreciation but also in respect of the amount of depreciation for assessment year 1986-87, the assessing officer was duty bound to consider the claim and record a finding for the purpose of arriving at the amount of unabsorbed depreciation required to be considered as part of the depreciation allowance under Section 32(1) on the basis of language contained in Section 32(2) of the Act. I, therefore, set aside the appellate order and direct the assessing officer to accept the claim of the assessee for allowance of unabsorbed depreciation of assessment year 1986-87 and then work out the quantum of depreciation allowance required to be considered under Section 32(1) of the Act.
5. During the course of submissions the learned representative of the assessee placed reliance in the case of Associated Excavators & Dozers (P) Ltd. v. ITO [ 1987] 20 ITD 357 (Cal.). In the case of Sathappa Textiles (P) Ltd. v. Second ITO [1969] 71 ITR 260 (Mad.) for the proposition that in similar situation even though loss may not be allowed to be carried forward yet unabsorbed depreciation had to be carried forward. Reliance was also placed on Eastern Cold Storage (P) Ltd. v. CIT [1983] 139 ITR 664 (Cal.) in support of the proposition that even if the amount of depreciation required to be carried forward was not determined by the tax authorities but then why assessee should suffer for inaction of that tax authority. Besides provisions of the Act had to be interpreted in a reasonable manner considering the scheme of the Act. The learned Senior Departmental Representative vehemently supported the appellate order by stating that if the language of Section 139(10) is found to be plain, though inequitous under certain circumstances' yet the assessee could not get the benefit as claimed. Besides language of Section 72(1) required that the loss had to be computed under Section 29 of the Act and if so computed for assessment year 1986-87 then depreciation for that year had to be considered as part Of the business loss and it is an admitted position that because of the belated return the loss was not allowed to be carried forward.
6. With regard to the cases cited by the learned representative of the assessee, the same are gone through and kept in mind in the aforesaid discussion. With regard to the submission of the learned Senior Departmental Representative, I would like to clarify that claim of the assessee is under Section 32(1) of the Act and distinction has to be drawn between the business loss before depreciation in which case carry forward of business loss will be governed by Section 72 and depreciation unabsorbed shall be governed by Section 32(2) of the Act, so as to form part of depreciation under Section 32(1) of the Act in the following assessment year.
7. In the result, the appeal is allowed.