2001 (3) TMI 1043 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Assessing Officer was justified in thrusting depreciation upon the assessee even though it was not claimed.
2. The impact of the amendment in section 32 and omission of section 34 on the allowability of depreciation.
3. The relevance of prior judicial decisions post the amendment by the Taxation Laws (Amendment & Misc. Provisions) Act, 1986.
4. The computation of profits for deductions u/s 80HHC and 80-I.

Summary:

1. Thrusting Depreciation:
The assessee argued that the claim of depreciation is optional and cannot be forced upon them. They relied on several judicial decisions, including CIT v. Mahendra Mills [2000] 243 ITR 561 (SC), which supported the view that depreciation is a benefit that the assessee can choose not to claim.

2. Amendment in Section 32 and Omission of Section 34:
The Department contended that the decisions cited by the assessee were not applicable post the amendment by the Taxation Laws (Amendment & Misc. Provisions) Act, 1986, effective from 1-4-1988. This amendment introduced the concept of depreciation on the block of assets and omitted section 34, which previously required furnishing prescribed particulars for claiming depreciation.

3. Relevance of Prior Judicial Decisions:
The Tribunal noted that the decision in Mahendra Mills was based on the provisions before the 1986 amendment. Post-amendment, the requirement to furnish particulars u/s 34 was removed, altering the legal position. The Tribunal also observed that the decision in Mahendra Mills acknowledged the change in law effective from 1-4-1988 and indicated that the ruling would not apply to periods after this amendment.

4. Computation of Profits for Deductions u/s 80HHC and 80-I:
The Tribunal held that for deductions u/s 80HHC and 80-I, the profits of the business must be computed in accordance with the provisions of the Income-tax Act, which includes allowing depreciation u/s 32. This view was supported by the Supreme Court's decisions in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 and Mettur Chemical & Industrial Corpn. Ltd. v. CIT [1996] 217 ITR 768, which emphasized that profits for special deductions must be computed after considering all permissible deductions, including depreciation.

Conclusion:
The Tribunal dismissed the appeal, upholding the Assessing Officer's decision to allow depreciation before computing the income for deductions u/s 80HHC and 80-I, as mandated by the amended provisions of the Income-tax Act.