2010 (3) TMI 984 - HC - Income Tax

Summary

Issues involved: Appeal challenging concurrent findings of order passed by Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal regarding applicability of explanation 5 to Section 32(1) of the Income Tax Act.

Summary:

1. Applicability of Explanation 5 to Section 32(1) of the Act:
The appeal raised substantial questions of law regarding the correct interpretation of explanation 5 to Section 32(1) of the Income Tax Act, introduced by the Finance Act of 2002. The Tribunal held that the explanation would apply prospectively and not to the present case. The issue was whether the explanation, being clarificatory in nature, should be read retrospectively and applied to pending matters, including that of the assessee.

2. Assessment and Depreciation Claim:
The assessee, engaged in manufacturing cement, filed a return of income for the year 1997-98 declaring a loss without claiming depreciation. During scrutiny assessment, it was observed that depreciation was allowable as per the Income Tax Act provisions. The assessment was completed on 27.3.1998. The Commissioner of Income Tax (Appeals) allowed the appeal based on a judgment of the Apex Court. The revenue's appeal to the Income Tax Appellate Tribunal was dismissed, leading to the current appeal.

Judgment:
The High Court noted that the questions of law in the appeal were similar to a judgment of the Kerala High Court in a related case. The Kerala High Court had determined that explanation 5 to Section 32 was prospective and not retrospective. Consequently, the High Court dismissed the appeal, ruling against the revenue based on the Kerala High Court's decision.

This judgment highlights the interpretation of statutory provisions, the importance of timely claim submissions in assessments, and the relevance of precedent in determining legal outcomes.