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Commissioner of Income Tax 1, Mumbai Versus M/s. Indian Rare Earths Limited

2015 (8) TMI 425 - BOMBAY HIGH COURT

Reopening of assessment - whether allowance of 'terminal' depreciation, which allowance is not allowable under any provision of the Act tantamounts to change of opinion ? - Held that:- The term "depreciation", as ordinarily understood in the context of the Income-tax Act, 1961, has been considered in the case of I. C. D. S. Ltd. v. CIT [2013 (1) TMI 344 - SUPREME COURT ] which was concerned with the interpretation of section 32 of the Income-tax Act, 1961 that Depreciation is the monetary equiva .....

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sion of the hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. reported in [2010 (1) TMI 11 - SUPREME COURT OF INDIA] which held that the concept of change of opinion should be used as a test to check any abuse of power by the Assessing Officer. In our view, the test is correctly applied in the present case and there was no occasion for the Assessing Officer to reopen the assessment without any tangible material which formed a live link to the formation of reason to believe esc .....

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oposed the following questions as substantial questions of law : "(1) Whether, in the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal is justified in holding that reason to reopen, being incorrect allowance of 'terminal' depreciation, which allowance is not allowable under any provision of the Act tantamounts to change of opinion ? (2) Whether, in the facts and in the circumstances of the case and in law, it is not true that a change of opini .....

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g that the assessment made under section 147 is bad in law ?" 2. In the present case, pertaining to the assessment year 2005-06, the assessee had claimed depreciation on building, plant and machinery, furniture, fixtures and vehicles amounting to ₹ 52,26,638. The claim of the assessee was described as "terminal depreciation". The Assessing Officer was of the view that the expression "terminal depreciation" is wrong as there is no provision under the Income-tax Act, .....

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appeal before the Commissioner of Income-tax (Appeals), the assessee was granted the benefits of the depreciation claimed. The Revenue, being aggrieved, preferred an appeal before the Income-tax Appellate Tribunal. The Tribunal was of the view that the depreciation claimed by the assessee during the previous year though described as terminal depreciation could not be disallowed and there was no case for reopening the assessment. The Tribunal found that the Assessing Officer had incorrectly conc .....

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'ble Supreme Court in the case of I. C. D. S. Ltd. v. CIT reported in AIR 2013 SC 3037, the hon'ble Supreme Court was concerned with the interpretation of section 32 of the Income-tax Act, 1961. The hon'ble Supreme Court held as under: "Depreciation is the monetary equivalent of the wear and tear suffered by a capital asset that is set aside to facilitate its replacement when the asset becomes dysfunctional. In P. K. Badiani v. CIT [1976] 105 ITR 642 (SC) this court has observed .....

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