Andhra HC (Pre-Telangana)
The Commissioner Of Income-Tax vs Andhra Cotton Mills Ltd. on 7 March, 1994
Equivalent citations: 1994(2)ALT77
Author: T.N.C. Rangarajan
Bench: T.N.C. Rangarajan
JUDGMENT
1. The facts leading to this reference are as follows:
The assessee is a company. For the assessment year 1979-80 corresponding to the previous year ended 31-3-1979, the assessee filed a return on 16-3-1980 showing a loss of Rs. 1,32,40,102/-. Later, a revised return was filed on 31-8-1981 showing a loss of Rs. 1,29,77,453/-. The Income-tax Officer, in the assessment order, computed the current profit at Rs. 4,32,364/- and the current depreciation at Rs. 9,64, 029/- leading to a net loss of Rs. 5,31,665/-. The contention of the assessee was that since there was carried forward loss, if depreciation is not allowed as a deduction, then the carried forward loss could be set off against the current profit and the current depreciation could be carried forward without limitation, unlike business loss, for which there is a period of limitation for set off. That was the reason why the assessee had filed a revised return withdrawing the claim for deduction of depreciation. The Income Tax Officer rejected that claim following the decision of this Court in Addl. C.I.T. v. Andhra Printers Ltd., 117 I.T.R.555. On appeal, the Commissioner of Income-tax (Appeals) accepted the claim of the assessee and directed the Income-tax Officer to withdraw the depreciation allowance given in the computation of income. On Revenue appeal, the Income-tax Appellate Tribunal affirmed the order of the Commissioner of Income-tax (Appeals) following the decision of the Punjab & Haryana High Court in Beco Engineering Co. Ltd. v. C.I.T., 148 I.T.R. 478 and distinguishing the decision of this Court in Andhra Printer's case, 117 I.T.R. 555. At the instance of the revenue, the following question has been referred:
"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is justified in upholding the orders of the Commissioner of Income-tax (Appeals) directing withdrawal of the deduction by way of depreciation allowed by the Income-tax Officer?"
2. The learned Counsel for the Revenue argued that the provisions of the statute require that true income should be ascertained and such income in respect of a business cannot be properly ascertained without deducting the depreciation, which is the first charge on the profits, as held by the Supreme Court in C.I.T. v. Mother India Refrigeration Indus. (P) Ltd., 155 I.T.R. 711 It was pointed out that the decision of the Punjab & Haryana High Court in Beco Engineering Co. Ltd.'s case, 148 ITR 478 and of the Bombay High Court in C.I.T. v. Shri Someshwar Shankari Sakhar Kharkhana, 177 I.T.R. 443 had held that depreciation allowance need not be given if particulars are not furnished as required by Section 34 of the Income-tax Act and, therefore, the assessee had an option not to claim depreciation. It is argued that this view was not shared by the Madras High Court in Dasaprakash Bottling Co. v. C.I.T., 122 I.T.R. 9 where it was held that the Income-tax Officer had a duty to allow depreciation when the particulars were available. None appeared for the respondent although notice was duly served.
3. According to the learned Counsel for the Revenue, even the statutory provisions relating to assessment require that particulars of depreciation had to be given and the deduction of depreciation allowance was necessary in making the assessment. We have gone through the decision cited by the learned Counsel for the Revenue and also the provisions of the Income-tax Act. We find that under Section 139(5), a revised return could be filed if there is an omission or a wrong statement. No doubt, in the case of a Company under the Companies Act, Schedule VI, Part-II, the profit and loss account need not contain a provision for depreciation. But that fact has to be mentioned. In the present case, the assessee had prepared a profit and loss account providing for depreciation and, therefore, did not opt for that option in the normal course of its business. In the original return, the profit and loss account containing the provision for depreciation has been filed. In the circumstances, it cannot be said that there was any wrong statement in the original return which could enable the assessee to file a revised return under Section 139(5). Since that revised return itself was not a valid return for being processed by the Income-tax Officer, the claim of the assessee that the particulars of depreciation are not given and, therefore, the deduction should not be allowed is untenable. Moreover, under Section 143(1)(b)(iv), even while making an assessment accepting the return of the assessee, the Income-tax Officer has to allow the proper deduction under Section 32. Under Section 143(3), an assessment made under Section 143(1) is deemed to be incomplete or inadequate if proper depreciation is not allowed. These provisions also indicate, along with Section 28 which requires that the income from a business has to be computed in accordance with the provisions of Sections 29 to 44, and read with Section 145 that depreciation is a proper deduction in arriving at the correct income from business. No doubt, Section 34 provides that the deduction shall be allowed only if the prescribed particulars are furnished. This only ensures that correct information is available to She Income-tax Officer for allowing the proper deduction. But this cannot be construed to mean that where the assessee deliberately withholds the information, no deduction for depreciation could be given in computing the income. In the present case, the motivation for the assessee to withdraw the claim for deduction of depreciation is only to get a set off of the business loss of. the earlier year. But the current depreciation is a first charge on the profit as held by the Supreme Court in Mother India Refrigeration Indus. (P) Ltd.'s case (3 supra) and that charge cannot be ignored by withholding the particulars so as to avail of the setting off of the earlier year's loss which lapses by the prescribed period of limitation. In our considered opinion, therefore, the assessee cannot withdraw the claim for depreciation allowance when particulars are available in accordance with Section 34 only for the purpose of setting off of the loss of the earlier years. Since the particulars were available as furnished along with the original return, the Income-tax Officer is bound to allow the deduction of depreciation in computing the income from business. The assessment made by the income-tax Officer, in this case, is, therefore, correct and in accordance with law. The question referred to us is, therefore, answered in the negative in favour of the Revenue and against the assessee.