Income Tax Appellate Tribunal - Ahmedabad
Uvifort Metalizers vs Dy. Cit on 7 December, 2000
Equivalent citations: (2001)73TTJ(AHD)381
ORDER
T.K. Sharma, J.M. This appeal by the assessee is directed against the order under section 263, dated 18-3-1999, of Commissioner, Central, Ahmedabad for the assessment year 1994-95.
2. The brief facts are that assessee- company originally filed return of income disclosing a loss of Rs. 10,79,28,500 after adjusting depreciation as per books of Rs. 1,66,46,504 and depreciation as per Income Tax Rules of Rs. 8,53,11,579. Subsequently a revised return was filed disclosing a loss of Rs. 2,26,16,978. In the revised return claim of depreciation was withdrawn. The assessing officer completed the assessment under section 143(3) on 17-3-1997, wherein he has accepted the claim of the assessee regarding withdrawal of depreciation on the basis of revised return. Subsequently the learned Commissioner found that order of the assessing officer is erroneous and prejudicial to the interest of the revenue. He, therefore, invoked the provisions of section 263 and after giving opportunity of hearing to the assessee and considering its reply concluded that the assessing officer acted upon the revised return of questionable validity and wrongly allowed the withdrawal of claim of depreciation. Further, on two other issues, he directed the assessing officer to verify the claim and allow the amount admissible as per law.
3. Aggrieved by the order of learned Commissioner, the assessee is in appeal, before us on the following grounds :
"1. The learned Commissioner has erred in law and on facts in invoking section 263 of the Act. The order of the learned assessing officer is not at all erroneous and prejudicial to the interest of the revenue and, therefore, under the fact and circumstances of the case the order of the learned assessing officer deserves to be confirmed.
2. The learned Commissioner has erred in law and on facts in holding that it is mandatory on the part of the appellant to claim depreciation. As a matter of fact there is a direct and binding decision of jurisdictional High Court taking a contrary view and the same ought to have been followed.
3. The learned Commissioner has erred in law and on facts, in not holding that the interest rebate pertains to assessment year 1995-96. Learned Commissioner further erred in sending the matter back to assessing officer for further verification.
4. The learned Commissioner has erred in law and on facts in directing the assessing officer to verity the claim for deduction under section 35D of the Act."
4. At the time of hearing before us on behalf of the assessee. Shri S.N. Soparkar appeared and contended that learned Commissioner in his order under section 263 directed the assessing officer to withdraw claim of depreciation for the reasons given in paras 1 to 12 of the impugned order under section 263. The counsel of the assessee pleaded that it is well settled by the judgment of Honble Gujarat High Court in the case of CIT v. Arun Textiles (1991) 192 ITR 700 (Guj) that assessee has option to claim the depreciation or to forgo it. It is urged by him that in case the assessee does not make a claim for depreciation, it cannot be forced upon the assessee. In support of this, reliance can be placed on the decision of this Tribunal order dated 6-3-2000, in the case of Sun Pharmaceutical Industries v. Dy. CIT (Appeals) in ITA Nos. 2355/A/98, 1261 & 1190/A/89 for the assessment years 1995-96 and 1996-97 and decision of Indore Bench of Tribunal dated 15-7-1993, in the case of Beta Naphthol (P) Ltd. v. Dy. CIT in ITA No. 1000/A/92 for the assessment year 1989-90.
5. On the other hand, Shri Pirthilal appeared for the revenue supported the order of learned Commissioner under section 263 whereby he concluded that assessing officer acted upon the revised return of questionable validity and wrongly allowed the writhdrawl of claim of depreciation. The learned Departmental Representative also relied on the judgment of Apex Court in the case of CIT v. Mahendra Mills (2000) 243 ITR 56 (SC) and contended that section 34 is omitted and section 32 has since been amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from 1-4-1988. The assessment year involved in the present appeal is 1994-95. As such after introduction of concept of block of assets, the assessee has no option and as per provisions contained in section 32(1) assessing officer shall grant the depreciation as required by law.
6. In the rejoinder learned authorised representative of the assessee submitted that word "shall" is also appearing in section 30 as well as section 31 of the Income Tax Act which are regarding allowance of rent, rates, taxes, repairs, insurance for buildings, etc. as well as repairs and insurance of machinery, plant and furniture. The expense under these two sections is allowable only when the assessee makes a claim. This clearly indicate that it is the option of the assessee whether to claim or not to claim. Once the claim is validly made in that event assessing officer has no option but to allow the same in accordance with law. The view taken by Honble Gujarat High Court in the case of Arun Textiles (supra) is also upheld by the Apex Court in the case of Mahendra Mills (supra). The counsel of the assessee also relied on the provisions contained in section 43(6)(c)(ii) which defined the written down value in respect of any previous year relevant to the assessment year commencing on or after the 1-4-1988. As per this provision even in respect of assessment year commencing on or after 1-4-1989, w.d.v. is to be computed by deducting the depreciation actually allowed and not "less old depreciation allowable". Therefore, depreciation which is not claimed cannot be made to reflect in w.d.v. of the block of assets. If the idea behind the provision was to provide for compulsory deduction for depreciation then w.d.v. of "block of assets" in newly inserted section 43(6)(c)(iii) by the Taxation Laws (Amendment and Miscellaneous Provision) Act, 1986, with effect from 1-4-1988, would have been defined so as to mean, the w.d.v. of the block of assets in the immediately preceding year as reduced by "depreciation allowable" instead of "depreciation actually allowed". Continuing his argument, learned counsel of the assessee submitted that provision of section 32(1) of the Act are intended to confer benefit on the assessee of claiming deduction on account of depreciation and whenever it is claimed it ought to be allowed and when not claimed assessing officer cannot force the assessee to claim depreciation. Even after omission of sub-section (1) of section 34 of the Income Tax Act and introduction of block depreciation with effect from assessment year 1988-89, assessing officer cannot grant the depreciation without particulars/informations in respect of assets sold or acquired during the previous year like actual cost, sale price as required by clause (A) and (B) of section 43(6)(c) of the Income Tax Act, 1961. The counsel of the assessee concluded that ratio of the judgment of the Apex Court in the case of CIT v. Mahendra Mills (supra) is applicable even after the introduction of the block depreciation scheme with effect from assessment year 1988-89. Regarding ground Nos. 3 and 4, counsel of the assessee pleaded that there is no justification whatsoever for giving second innings to the assessing officer. Therefore, entire order of the Commissioner under section 263 be set aside.
7. Having heard both the sides, we have carefully gone through the orders of authorities below as well as decisions relied by both the sides. The Apex Court in the case of CIT v. Mahendra Mills (supra) had upheld the liberal view regarding the matter of option to claim the depreciation that taxpayer has option to claim or not to claim depreciation. In the said judgment it was pointed out that the Board itself had taken the view that furnishing of requisite particulars is a precondition for the allowance. If the assessee could forgo the depreciation by not furnishing the particulars, there was no reason why it should not be treated as a matter of option. The significance of the words "actually allowed" in law would expect a positive allowance with reference to the actual cost incurred by the assessee. After detailed consideration of various decisions and the precedents on the subject involving different facts as in cases, where depreciation was not claimed at all or depreciation was claimed but sought to be withdrawn by a revised return, the Apex Court did not find any difference. Admittedly the judgment in the case of Mahendra Mills (supra) was rendered in the context of law prior to block depreciation introduced with effect from assessment year 1988-89. The w.d.v. in case of any block of assets is defined in clause (b) of section 43(6)(c) of Income Tax Act, 1961. We find considerable force in the submissions of learned counsel of the assessee that even after omission of sub-section (1) of section 34 and introduction of block depreciation w.e.d. 1-4-1988, the assessing officer cannot grant the depreciation without particulars/information in respect of assets sold or acquired during the previous year like actual cost, sale price as required by clauses (A) and (B) of section 43(6)(c) of Income Tax Act, 1961. After the introduction of concept of block of assets also we find that idea behind the provision was not to provide for compulsory deduction for depreciation. Had this been so in that event w.d.v. of block of asset in newly inserted section 43(6)(c)(iii) by Taxation Laws (Amendment and Miscellaneous Provision) Act, 1986, w.d.v. 1-4-1988, would have been defined so as to mean, the with effect from of the block of assets in the immediately preceding year as reduced by "depreciation allowable" instead of "depreciation actually allowed". Further, the decision of this Tribunal in the case of Sun Pharmaceutical Industries Ltd. (supra) as well as the decision of Indore Bench of Tribunal in the case of Beta Naphthol (P) Ltd. (supra) also support the contention of the learned counsel of the assessee. Looking to the entirety of the facts and circumstances, we are of the view that the option to claim the depreciation is implicit on account of requirement to furnish particulars and we are of the view that even after omission of sub-section (1) or section 34 of Income Tax Act assessee is required to furnish the particulars of assets acquired during the previous year as well as assets falling within the earlier block, which is sold or discarded or demolished or destroyed during the previous year. We find that Apex Court in the case of Mahendra Mills (supra) has also observed that depreciation is a privilege and it cannot be to a disadvantage of the assessee because an option cannot become an obligation. On overall consideration of all aspects of the matter, we are of the opinion that learned Commissioner is not at all justified in directing the assessing officer in impugned order under section 263 to thrust depreciation on the assessee.
8. In view of the foregoing, we hereby hold that exercise of revisionary power by Commissioner on depreciation issue is without jurisdiction. His order on this issue is hereby vacated. Regarding the remaining two issues, in our opinion, the learned Commissioner is justified in invoking his revisionary power. Therefore, we decline to interfere.
9. In the result, the appeal of the assessee is treated as partly allowed.