TMI Blog2005 (7) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Indian Rayon Corpn. Ltd. vs. CIT (2003) 182 CTR (Bom) 247 has considered this issue and held that depreciation is to be given to an assessee before computing the deduction under s. 80-IA. 3. We have duly considered the rival contentions. The issue whether depreciation is to be thrust upon the assessee even if it is not claimed while computing the gross total income before granting deduction under ss. 80-IA, 80HH and 80HHC has been considered by the Tribunal in the above decision elaborately and lucidly. The Tribunal has also considered the similar arguments as raised by learned CIT-Departmental Representative before us. The Tribunal made a lucid enunciation of law on the subject and we cannot do better than to extract some of the observations made in that decision: "8. We have given a very careful consideration to the submissions made before us and have gone through the facts vis-a-vis the judicial pronouncements cited. The facts are clear and undisputed and the moot question which arises to be adjudicated is whether in the case of an assessee who has claimed deduction under Chapter VI-A of the IT Act, depreciation can be thrust upon him by the AO even though not claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial undertaking. The illustration given at p. 103 of the report presents the facts of that case clearly. In that case, the assessee claimed deduction for depreciation from the gross total income, but while claiming the benefit of s. 80HH, the assessee contended that the deduction under s. 80HH be allowed on the gross income without allowing depreciation. The Hon'ble High Court did not approve such an approach, and rightly so. Again at p. 105 of the report, the Hon'ble High Court observed that the illustration indicates that the assessee had not disclaimed depreciation, and therefore, the High Court went on to observe, the Supreme Court judgment in the case of Mahendra Mills has no application. Again at p. 106 of the report, the High Court reiterated that in the case before the High Court, the assessee claims depreciation of Rs. 75 from the balance income of Rs. 80 and therefore the judgment of the Supreme Court in Mahendra Mills' case will not apply. From the above, it becomes abundantly clear that the facts of the case, which came up before the Hon'ble Bombay High Court, are materially different from the facts of the assessee's case. The assessee has not claimed depreciation at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the prescribed particulars should have been furnished. If either of these conditions is not fulfilled, the deduction cannot be allowed by the ITO.' The Tribunal observed that even though the second precondition is dispensed with by the omission of s. 34, the first precondition, which is implicit that the assessee should have asked for depreciation, still exists. The Tribunal also refers to the Board's Circular No. 29.D.XIX-14, 1965 dt. 31st Aug., 1965, wherein the same view was expressed. 10. Similar issue came up for decision before the Tribunal, SMC Bench, Mumbai, in the case of Rubinsha Exports (P) Ltd. It was held that depreciation allowance cannot be thrust upon the assessee if not claimed. Here, a reference may be made to the Tribunal, Mumbai Bench decision in the case of Mandhana Exports (P) Ltd. vs. Asstt. CIT (2002) 76 TTJ (Mumbai) 559 : (2002) 82 ITD 306 (Mumbai) which has been relied upon by the learned CIT, Departmental Representative. In this case, a different view has been taken and it has been held that after omission of s. 34, depreciation can be allowed by the AO even if not claimed by the assessee. We find that the decision in the case of Mandhana Exports (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Gujarat High Court in the case of CIT vs. Arun Textile (1991) 98 CTR (Guj) 117 : (1991) 192 ITR 700 (Guj), have been reproduced from p. 705 of the report: 'The provisions of s. 32 are intended to give benefit to the assessee for claiming deductions in respect of depreciation on the type of assets mentioned therein. Furthermore, a mere claim to deduction would not be enough since the deductions are to be allowed subject to the provisions of s. 34 which required necessary particulars to be furnished in the prescribed form. Therefore, until a claim is made for allowing deductions of the nature covered under s. 32 along with necessary particulars, there would hardly be any occasion for the ITO to allow any claim. In the context in which the word 'allowed' is used in s. 32(1), it is clear to us that the meaning intended is 'to admit something claimed'. The word 'allowed' means 'to accept as true or valid, to acknowledge, admit, grant, to admit something claimed, to acknowledge grant, concede'. There is nothing in the provisions of s. 32(1) r/w s. 29 of the Act to indicate that even when no claim is made for allowing deduction in respect of the depreciation under s. 32(1), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where deduction under Chapter VI-A is claimed. As mentioned above, the depreciation is not allowable and cannot be thrust upon the assessee under s. 32 if no claim has been put by the assessee. The same rule shall apply while computing gross total income for the purpose of s. 80-IA. This view is further strengthened by the fact that Expln. 5 has been inserted under s. 32 by the Finance Act, 2001 w.e.f. 1st April, 2002. This Explanation provides that s. 32 shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income. It has been held by the Courts that Expln. 5 is prospective in operation and will, therefore, apply for the asst. yr. 2002-03 and subsequent years. Following from the discussion given above, we hold that the learned CIT(A) was not justified in confirming the AO's action in allowing depreciation which has not been claimed by the assessee. The AO is, therefore, directed not to allow depreciation." In view of the above, we allow this ground of appeal and direct the learned AO not to thrust the depreciation upon the assessee before computing the deduction under s. 80-IA. 4. The next ground relates to dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in the "book profit" which is eligible for deduction under s. 80-IA of the Act. 8. The brief facts of the case are that assessee is an industrial undertaking situated in the backward area which is entitled for a deduction under s. 80-IA @ 100 per cent. While computing the book profit as available under s. 115JA, learned AO has not reduced this deduction according to cl. (vi) of the Explanation appended with s. 115JA. Learned counsel for the assessee submitted before us that according to this clause while working out book profit the AO ought to have excluded the deduction admissible to the assessee under s. 80-IA. Since the assessee is entitled for the deduction @ 100 per cent, therefore, its book profit ought to have been determined at "nil' even for this provision. On the other hand, learned Departmental Representative relied upon the order of AO and contended that s. 115JA is specific provision which is applicable on the assessees who do not disclose any profit. 9. We have duly considered the rival contentions. Sec. 115JA has a direct bearing on the controversy, therefore, it is imperative for us to take note of this section. "115JA. Deemed income relating to certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e P L a/c, and as reduced by,- (i) the amount withdrawn from any reserves or provisions if any such amount is credited to the P L a/c: Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 but ending before the 1st day of April, 2001 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the P L a/c; or (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation .-For the purposes of this clause,- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation, is nil; or (iv) the amount of profits derived by an industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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