Indian Kanoon - Search engine for Indian Law

1. It is a reference at the instance of the Revenue relating to the assessment of income of the assessee for the assessment year 1978-79 and the following questions of law have been referred to us for our consideration :

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the revised return filed by the assessee was valid under Section 139(5) of the Income-tax Act ?

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that after the filing of the revised return, it was not open to the Income-tax Officer to look into the particulars of depreciation furnished with the original return for allowing the admissible depreciation ?

7. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that depreciation was admissible on roads forming part of the assessee's factory ?

8. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that depreciation on laboratory equipment was admissible at 15 per cent, and not at 10 per cent. ?"

2. The assessee is a company engaged in the manufacture of urea. The assessee filed its return of income for the assessment year 1978-79 on December 14, 1978, disclosing a business loss of Rs. 26,38,48,778 which included the current year's depreciation of Rs. 9,63,65,559. The assessee subsequently filed a revised return on December 11, 1980, admitting a loss of Rs. 16,74,83,219 wherein the assessee withdrew its current year's depreciation claimed in the original return with a view to secure the benefit of set off of the unabsorbed development rebate which would have otherwise lapsed as time barred. The Income-tax Officer, while completing the assessment, held that the return filed by the assessee on December 11, 1980, was not a revised return and was not valid under Section 139(5) of the Income-tax Act, 1961 {hereinafter to be referred to as "the Act"), as the assessee could not be said to have committed any omission or made any wrong statement while furnishing the details for the claim of depreciation in the original return. The Income-tax Officer following the decision of this court in the case of Dasaprakash Bottling Co. v. CIT [1980] 122 ITR 9, granted depreciation for the assessment year in question taking into account the details furnished along with the original return. The Income-tax Officer also disallowed the claims of the assessee towards depreciation on roads, depreciation on laboratory equipment at 15 per cent, and depreciation on expenditure treated as capital in the assessment order for the assessment year 1976-77. The Income-tax Officer held that as regards depreciation on laboratory equipment, the admissible rate was only 10 per cent.

4. The Revenue carried the matter in appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal held that the revised return was a valid return within the meaning of Section 139(5) of the Act and since the revised return did not contain particulars, the Income-tax Officer could not have granted the depreciation and no depreciation would be allowed. The Tribunal relied upon a circular of the Board No. 29D dated August 31, 1965, and held that the decision of this court in Dasaprakash Bottling Co.'s case [1980] 122 ITR 9, is distinguishable as in that case particulars were furnished but in the instant case, there were no particulars before the Income-tax Officer to grant depreciation. According to the Tribunal, the revised return was filed to substitute the original return, and the original return must be deemed to have been withdrawn. The Tribunal held that it is not open to the Income-tax Officer to look into the particulars filed along with the original return. The Tribunal also found that the assessee had explained reasons for filing the revised return that the assessee desired to have the benefits of unabsorbed carry forward of development rebate, unabsorbed investment allowance and unabsorbed Section 80J deficiencies, which would not be available if the current year depreciation was granted. The Tribunal has taken into consideration the above factors and found that the Income-tax Officer was not correct in granting the current year's depreciation and the Tribunal also held that by not granting the current year's depreciation, the priority fixed by the Income tax Act for the allowance of depreciation and other allowances would not in any way, be disturbed. The Tribunal placed reliance on a circular of the Board and held that unless the required particulars were furnished by the assessee, the Income-tax Officer should estimate the income without allowing depreciation. The Tribunal, therefore, held that the grant of depreciation was not in accordance with law. As regards other items, the Tribunal held that the assessee was entitled to claim depreciation on roads, depreciation on laboratory equipment at 15 per cent, as against 10 per cent, granted by the Income-tax Officer and also depreciation on capital expenditure. This order of the Appellate Tribunal is the subject-matter of the present tax case reference and the Tribunal has stated a case on the questions of law set out earlier.