TMI Blog2001 (3) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate that section 34 had no say in deciding the allowability of depreciation and in view of the matter, the omission of section 34 from the Act shall not alter the position of not claiming of depreciation; 5. erred in holding that in order to work out the profits and gains of business , depreciation has to be considered, whether opted by assessee or not, without appreciating that depreciation is benefit/incentive given and to claim or not claim is upto the assessee to decide . 3. At the time of hearing before us, it is submitted by the learned representative for the assessee that the claim of depreciation is optional and it cannot be thrusted upon the assessee. The assessee in this case has not claimed depreciation and, therefore, the Assessing Officer was not justified in allowing depreciation, though not claimed by the assessee. In support of this contention, he relied upon the following decisions : 1. CIT v. Mahendra Mills [2000] 243 ITR 561 (SC) 2. CIT v. Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555 (SC) 3. Chief CIT (Adm.) v. Machine Tool Corpn. of India Ltd. [1993] 201 ITR 101A (Kar.) 4. CIT v. Kolhapur Oxygen Acetylene (P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,27,53,348. He allowed the same in computing the total income of the assessee. Total income before claim of depreciation was ₹ 73,76,313. Therefore, the Assessing Officer allowed the depreciation to the above extent in the year under consideration and balance depreciation of ₹ 53,77,932 was allowed to be carried forward. Since the gross total income of the assessee was determined at nil , no deduction under sections 80HHC and 80-I was allowed. 6. Aggrieved by the order of the Assessing Officer, the assessee went in appeal to the CIT(A), who sustained the order of the Assessing Officer. Aggrieved by the order of CIT(A), the assessee is now in appeal before us. 7. At the time of hearing before us, the ld. representative for the assessee heavily relied upon the decision of Hon ble Apex Court in the case of Mahendra Mills (supra ) and claimed that the claim of depreciation is optional. The Assessing Officer cannot thrust the depreciation upon the assessee when it is not claimed. In the case of Mahendra Mills (supra). Their Lordships have accepted the assessee s contention and held as under : The language of the provisions of sections 32 and 34 of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. However, the position is altogether different after the omission of section 34 by the Taxation Laws (Amendment Misc. Provisions) Act, 1986, w.e.f. 1-4-1988. After the omission of section 34, there does not remain any condition of furnishing the information to be eligible to claim depreciation. We may also mention that the Hon ble Apex Court, while deciding the matter in the case of Mahendra Mills (supra), was aware about the subsequent change in the Income-tax Act and had observed at page 58 ITR 243 as under : Section 32 has since been amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from 1-4-1988. However, the answer to the questions remains of substantial importance as various matters are stated to be pending in the High Court s relating to the assessment years prior to 1-4-1988. Section 32 as it stood prior to 1-4-1988, in the relevant part, is as under : From the above observation, it is obvious that their Lordships are of the opinion that this decision would not be applicable to the period subsequent to the amendment by Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986. The year under appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is decided in favour of the assessee . From the above, it is evident that perhaps the amendment made by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, and omission of section 34 was not brought to the notice of the learned Members of ITAT (Pune Bench). Therefore, they had no occasion to consider whether the decision of Hon ble Apex Court in the case of Mahendra Mills (supra ) would be applicable after the omission of section 34. 10. We may also mention that in this case the assessee claimed deduction under section 80HHC/80-I. Deduction under section 80HHC is to be allowed on the profits derived by the assessee from export of goods and merchandise. Explanation (baa) to section 80HHC provides that the expression profits of the business means the profits of the business as computed under the head Profits and gains of business or profession . Income under the head Profits and gains of business or profession is to be computed under Chapter IV-D. Section 28 of the Income-tax Act enumerates the various types of income which is chargeable to income-tax under the head Profits and gains of business or profession . As per section 29, the income referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward of development rebate). The above decision would be squarely applicable to the case under appeal before us also because the profits and gains for the purpose of deduction under section 80-I/80HHC are also to be computed in accordance with the other provisions of the Act, i.e., in accordance with sections 30 to 43D which includes section 32 also. The above decision in the case of Cambay Electric Supply Industrial Co. Ltd. (supra) is also followed by the Hon ble Apex Court in the case of Mettur Chemical Industrial Corpn. Ltd. v. CIT [1996] 217 ITR 7681 wherein Their Lordships held as under : The profits and gains of an industrial undertaking to which section 84 of the Income-tax Act, 1961, applies have to be computed in accordance with the provisions contained in Chapter IV-D of the Act and development rebate has first to be deducted from the total income and it is only thereafter, if any profits and gains remain from this business, that the benefit under section 84(1) of the Income-tax Act would be applicable. In view of the above, we have no hesitation to hold that the Assessing Officer was fully justified in allowing the depreciation before computing t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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