2012 (7) TMI 976 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(Appeals) under sec.143(3(ii) of the Income Tax Act, involving claim of deduction under sec.35D and additional depreciation disallowed by Assessing Officer and CIT(Appeals).

Claim of deduction under sec.35D:
The Assessee raised two substantive grounds in the appeal, one being the claim of deduction under sec.35D of the Act of Rs. 18,53,614/- of share premium amount. The Authorised Representative did not press this ground. The issue for adjudication was whether the disallowance of additional depreciation of Rs. 66,07,471/- made by the Assessing Officer and confirmed by CIT(Appeals) should be upheld.

Additional depreciation claim:
The Assessee filed a return in which it raised a claim of additional depreciation that was allegedly omitted. The Assessing Officer disallowed the claim based on a court judgment and made other additions to the income. The CIT(Appeals) confirmed the disallowance, leading to the appeal by the Assessee.

Arguments and findings:
The Authorised Representative argued that the depreciation claimed by the Assessee is a statutory deduction that should be granted even if not claimed, citing Explanation 5 of sec.32(1)(ii) of the Act. The Departmental Representative opposed this argument. The Tribunal found that the legislative intent was to grant the benefit of deduction for depreciation even if not claimed, and that the provision should be construed liberally in favor of the Assessee. The Tribunal also noted that its jurisdiction under sec.254(1) of the Act was not impinged.

Decision and directions:
The Tribunal held that the Assessee is entitled to the mandatory deduction of additional depreciation. However, as there was no adjudication on merits by the Assessing Officer or CIT(Appeals), the Tribunal directed the Assessing Officer to re-examine the claim in accordance with the law and provide the Assessee with an opportunity to justify the claim with evidence. The appeal was partly allowed for statistical purposes.

This judgment highlights the importance of statutory deductions and the liberal interpretation of provisions in favor of the taxpayer, emphasizing the need for proper adjudication and examination of claims by the tax authorities.