TMI Blog2008 (2) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... er Companies Act to the net profit for the purpose of computing gross total income. The assessee did not claim any depreciation allowable as per Income-tax Act. Thus the profits shown by the assessee were not the actual profits of the assessee company. The assessee company earned profits by using its assets but did not claim depreciation with the intention to claim higher deduction under Chapter VI-A of the Act. The Assessing Officer, therefore, worked out depreciation allowable to the assessee. He recomputed WDV and depreciation to be deducted for the purpose of determination of gross total income for assessment years 1998-99 to 2004-05. Accordingly, reassessment under section 153A was made for assessment years 1998-99 to 2003-04 and assessment under section 143(3) was made for assessment year 2004-05. 3. The matter was carried in appeal before Ld. CIT(A). It was pleaded by Shri Vinod Kumar Bindal CA, the Authorised Representative of the assessee that when the assessee had neither claimed depreciation nor it was allowed for assessment years 1994-95 to 1997-98 then how can the Assessing Officer compute the opening WDV for assessment year 1998-99 by allowing depreciation notional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) considered the submissions made by Assessing Officer as well as by the Ld. AR of the assessee. He observed that it was a fact that the decision of Hon'ble Supreme Court in the case of Mahendra Mills (Supra) relied upon by the Ld. AR of the assessee was not applicable for the reasons that the said decision related to assessment years 1981-82 and 83-84 and section 34(1) of the Act was omitted w.e.f. 01.4.1988. Ld. CIT(A) further observed that the decision of ITAT Mumbai Bench in the case Mandhana Exports P. Ltd.(Supra) could be made effective retrospectively. But since the Finance Act, 2001 inserted Explanation 5 to section 32(1) w.e.f 01.4.2002, the assessee had an option not to claim depreciation upto assessment years 2001-02. Hon'ble Supreme Court in the case of CIT v/s Varas International Pvt. Ltd., 283 ITR 484, relying on the earlier decisions in the cases of CIT v/s Podar Cement P. Ltd, 226 ITR 625, Allied Motors P. Ltd. v/s CIT, 224 ITR 677; Suwea Lal Anandi Lal Jain v/s CIT 224 ITR 753; and in the case of Brij Mohan Das Laksman Das v/s CIT, 223 ITR 825, held that where an amendment of a statute was construed retrospective in nature, the amended provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved by the order of Ld. CIT(A), the Revenue filed appeals for assessment years 1998-99 to 2004-05. 7. Before us, Ld. CIT-DR, Ms. Meeta Nambiar submitted that Ld. CIT(A) has held that the Explanation 5 to Section 32(1) is not retrospective in nature. She submitted that decision of Hon'ble Supreme Court in the case of Varas International Pvt. Ltd. (Supra) was not applicable to the facts of the case of the assessee before this Tribunal. In that case, Hon'ble Supreme Court while interpreting the issue has placed reliance on its earlier decisions. In the case Allied Motors Ltd. (Supra) the issue was related to omission of proviso to section 43B. The decision in the case of Brij Mohan Das Laksman Das (Supra) related to interest paid to the partners. In Podar Cement Pvt. Ltd. (Supra), the issue was relating to the ownership of assets. Likewise in the case of Suwea Lal Anandi Lal Jain (Supra), the issue related to interest paid to the partner. None of the decisions referred by Hon'ble Supreme Court related to the allowability of depreciation. Therefore the decision of Hon'ble Supreme Court in the case of Varas International Pvt. Ltd. (Supra) is distinguishable on facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of addition/ deletion in the block of assets. 8. On the other hand, ld. AR relied on the order of Ld. CIT(A). However, it was clarified by him that by not claiming depreciation allowance under section 32(1), no tax planning was involved on the part of the assessee. 9. We have heard both the parties and perused the material available on record. The facts of the case are not in dispute. Ld. CIT(A) has directed the Assessing Officer not to allow depreciation for assessment years 1998-99 to 2001-02 in view of the decision of Hon'ble Supreme Court in the case of Mahendra Mills (Supra). He had also relied on the decision of Hon'ble Supreme Court in the case of Varas International Pvt. Ltd. (Supra). One of argument of ld. CIT-DR is that assessee's case is covered by the decision of Hon'ble Bombay High Court in the case of Indian Rayon Corporation Ltd. (Supra) In this case, the assessee claimed deduction under section 80HH without claiming depreciation allowance under section 32 of the Act. In this case the issue for consideration for their Lordship was: Whether on the facts and in the circumstances of the case, the Tribunal was justified in coming to the concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of computation of gross profits out of which deduction under Chapter VIA are to be allowed. Further Hon'ble Justice DP. Wadhwa at page 58 of the decision in the case of Mahendra Mills (Supra) had specifically mentioned section 32 has since been amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. April 1, 1988. However, the answer to the question remains of substantial importance as various matters are stated to he pending in the High Courts relating to the assessment years prior to April 1, 1988. This observation of Hon'ble Justice DP. Wadhwa proves beyond doubt that the decision of Mahendra Mills (Supra) is applicable for assessment years prior to 01.4.1988 i.e. upto AY 1987-88. Thus the decision of Hon'ble Supreme Court in the case of Mahendra Mills Ltd (supra) cannot be applied for AY 1988-89 onwards. Since the issue is squarely covered by the decision of Hon'ble Bombay High Court and the Ld. AR of the assessee cited no other contrary decision, we are of the view that for the purpose of computing gross profits, for allowing deduction under section 80HHC, depreciation has to be allowed. Accordingly, in our view Ld. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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