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2004 (2) TMI 691 - AT - Income TaxDeduction u/s 80-IA - Income from the industrial undertakings - allowance of depreciation - 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 Assessing Officer even through not claimed by the assessee. HELD THAT - From the record, it is clear that if the assessee has not claimed depreciation, the same cannot be allowed while computing the gross total income. The principles of interpretation for computing gross total income cannot be different while computing the gross total income in a case where deduction under Chapter VI-A is claimed. As mentioned, the depreciation is not allowable and cannot be thrust upon the assessee u/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 section 80- IA. This view is further strengthened by the fact that Explanation 5 has been inserted u/s 32 by the Finance Act, 2001 w.e.f. 1-4-2002. This Explanation provides that section 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 Explanation 5 is prospective in operation and will therefore apply for the assessment year 2002-03 and subsequent years. Thus, we hold that the ld. CIT(A) was not justified in confirming the Assessing Officer s action in allowing depreciation which has not been claimed by the assessee. The Assessing Officer is, therefore, directed not to allow depreciation. In the result, the assessee s appeal stands partly allowed.
Issues Involved:
1. Thrusting of depreciation u/s 32. 2. Assessment of rent income as income from house property. 3. Disallowance of depreciation in respect of Delhi office property. 4. Computation of deductions u/s 80-IA. 5. Assessment of interest earned on SBI Bonds as income from other sources. Summary: 1. Thrusting of depreciation u/s 32: The assessee contested the CIT(A)'s decision to uphold the Assessing Officer's (AO) action of thrusting depreciation of Rs. 2,67,69,235 on the company, despite the company not claiming it. The AO argued that not claiming depreciation was a form of tax planning to maximize deductions u/s 80-IA. The CIT(A) upheld the AO's decision, noting that the legal position changed after the deletion of section 34. However, the assessee cited the Supreme Court's decision in CIT v. Mahendra Mills, which clarified that depreciation cannot be forced upon an assessee if not claimed. The Tribunal agreed with the assessee, stating that the Bombay High Court's decision in Indian Rayon Corpn. Ltd. v. CIT was not applicable as the facts differed. The Tribunal concluded that depreciation cannot be thrust upon the assessee if not claimed, even after the deletion of section 34. 2. Assessment of rent income as income from house property: The assessee's ground that the rent income of Rs. 3,60,000 should be assessed as business income rather than income from house property was not pressed. Therefore, the CIT(A)'s decision to assess it as income from house property was confirmed. 3. Disallowance of depreciation in respect of Delhi office property: The assessee did not press the ground regarding the disallowance of depreciation of Rs. 2,72,583 for the Delhi office property. Consequently, the CIT(A)'s decision was upheld. 4. Computation of deductions u/s 80-IA: The CIT(A) held that the ground regarding the computation of deductions u/s 80-IA was infructuous as it was linked to the allowance of depreciation. The Tribunal directed the AO to allow the deduction u/s 80-IA without deducting depreciation, following the decision on the first issue. 5. Assessment of interest earned on SBI Bonds as income from other sources: The assessee did not press the ground regarding the assessment of interest earned on SBI Bonds as income from other sources. Thus, the ground was rejected as not pressed. Conclusion: The assessee's appeal was partly allowed, with the Tribunal directing the AO not to allow depreciation that was not claimed by the assessee and to compute deductions u/s 80-IA accordingly. Other grounds not pressed by the assessee were confirmed as decided by the CIT(A).
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