TMI Blog2006 (4) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO, the reasons for not claiming the depreciation was that unabsorbed depreciation could not have been carried forward for set off for more than 8 years. The assessee wanted to avail depreciation allowance as and when it had positive income and hence, it did not claim it in this year as it had loss. The Assessing Officer considered assessee s contentions. According to him, the profit and gains from business or profession has to be worked out as per section 28. Section 29 envisages that such income should be computed in accordance with the provisions of sections 30 to 43D. The learned Assessing Officer observed that decision of Hon ble Supreme Court in CIT v. Mahendra Mills case ( supra ) pertained to the pre-amendment law when section 34(1) was in the statute and which was deleted with effect from 1-4-1988. The above judgment mainly was based on the provisions of section 34(1). Section 34(1) stated that deduction referred in sub-section (1) or (1A) of section 32 shall be allowed only if prescribed particulars have been furnished. Thus, where particulars are not furnished, the question of allowing depreciation will not arise. After deletion of section 34(1), such requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Punjab Haryana High Court is the only decision and therefore, it is binding on the parties by virtue of the decision of Hon ble Bombay High Court in CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589. 5. Against this, the learned DR submitted that the issue is squarely covered in favour of the revenue by the decision of Special Bench of ITAT in Vahid Paper Converters [IT Appeal No. 1686 (Mum.) of 2004]. It has been followed by ITAT, Mumbai in IT Appeal No. 301 (Mum.) of 1994 in Dy. CIT v. GP Electronics Ltd. dated 25-11-2005. The learned DR also submitted that all those decisions, which had followed Mahendra Mills ( supra ) pertained to the period prior to 1-4-1988 when section 34 was in statute. Even though Explanation 5 to section 32(1) has been treated prospective, but it is an Explanation , which explained the intent of the Legislature from the day of the main section was introduced. Even otherwise, total income of the assessee has to be computed in accordance with the provisions of sections 30 to 43D of the Act. By the use of word shall in section 32(1) no option is left with the Assessing Officer but to calculate depreciation and allow it. Further, inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see claims depreciation. These particulars are required to be furnished in great detail. Circular No. 29D(XIX-14) of 1965." 8. From the above, it follows that for the purposes of deciding the issue section 32 has to be read jointly with section 34. Section 34 provides that deduction under section 32 shall be allowed only if prescribed particulars have been furnished. Section 34 which is deleted with effect from 1-4-1988 reads as under : "(1) The deductions referred to in sub-section (1) or sub-section (1A) of section 32 shall be allowed only if the prescribed particulars have been furnished; and the deduction referred to in section 33 shall be allowed only if the particulars prescribed for the purpose of clause ( i ) and clause ( ii ) of sub-section (1) of section 32 have been furnished by the assessee in respect of the ship or machinery or plant." Thus, a power vested in the Assessing Officer to examine the claim of depreciation and allow it only when prescribed particulars are furnished by the assessee. These particulars included, brought forward WDV, assets acquired during the year, or sold during the year, rates of depreciation, whether asset was used in that year or no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce been amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from April 1, 1988. However, the answer to the question remains of substantial importance as various matters are stated to be pending in the High Courts relating to the assessment years prior to April 1, 1988". 10. On the question whether the decision of Hon ble Supreme Court in Mahendra Mills case ( supra ) should be followed even after removal of section 34 and rule 5AA, learned DR submitted that change in fact and change in law materially affect the nature of binding procedure. We feel that the nature of binding precedence considerably affected by changes in factual matrix and law on the subject. In Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147, Hon ble Supreme Court held as under : "Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -A has to be reduced. If this is allowed to work, then gross total income before allowing deduction under Chapter VI-A would be more than the gross total income for the purpose of computing deduction within Chapter VI-A. In the former, depreciation allowance is not considered because it is not claimed by the assessee, whereas in the later, it had to be considered irrespective of the fact whether it is claimed by the assessee or not in view of Vahid Paper Converters case. The deduction of gross total income as per Income-tax Act, 1961 is only one. As per section 80B(5) "gross total income" means the total income computed in accordance with the provisions of this Act, before making any deductions under this chapter. Section 80AB read as under : "80AB. Deductions to be made with reference to the income included in the gross total income. Where any deduction is required to be made or allowed under any section (except section 80M) included in this Chapter under the heading "C Deductions in respect of certain income" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by the assessee, while computing the total income of the assessee under the head "income from Business or profession". The CIT(A) did not appreciate that section 34(1) stood deleted from 1-4-1988 and that Explanation 5 to section 32 clarifying the allowability of depreciation as being mandatory was introduced merely for the removal of doubts and therefore, its applicability was not prospective in nature and hence, squarely applicable to the assessee s case." This was answered by ITAT as under : "9. In view of the above pleadings, we kept our decision pending on this issue. Now the order of the special Bench is available. The special Bench has decided this issue against the assessee in the case of Vahid Paper Converters, Daman, vide order dated 9-11-2005, wherein it has been held that profits derived from industrial undertaking under section 80-IA has to be computed after taking into consideration the depreciation under section 32 of the Act, despite the fact that assessee has not claimed the same for computing the regular income under the head "income from Business or profession". Therefore, following the same, the issue is decided in favour of the Revenue. The addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars. Now, there is no such power in the Assessing Officer to disallow depreciation, if particulars are not furnished and therefore, there is no such advantage or option available with the assessee. The source of such advantage and hence, option to the assessee to claim or not to claim depreciation, was the power of the Assessing Officer to disallow depreciation, if particulars are not furnished. When that situation is no longer in the statute, then there is no advantage or option available to the assessee. Therefore, we are of the considered view that in the absence of statutory requirement to furnish particulars before an assessee become entitled for depreciation, format alone in the return will not decide any liability or the duty of the parties. Nevertheless, old formats under rule 5AA have lost relevance under concept of block of assets. 11. Regarding the issue whether Explanation 5 to section 32 introduced by the Finance Act, 2001 with effect from 1-4-2002 is retrospective, the learned AR submitted that is prospective in view of the decision of Hon ble Punjab Haryana High Court in Ramnath Zindal s case ( supra ). In our view, this aspect is not going to have any e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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