2015 (1) TMI 484 - HC - Income Tax

Depreciation - whether claimed or not has to be foisted upon the assessee even prior to insertion of Explanation 5 to S.32(1) of the Act with effect from 01/04/2002, while calculating deduction under Chapter VI-A of the Act - Held that - The present appeals deserve to be allowed as the question of law raised in these appeals is answered in favour of the assessee and against the revenue. Accordingly, we hold that the Tribunal was not right in law in holding that depreciation, whether claimed or not, has to be foisted upon the assessee even prior to insertion of Explanation 5 to S.32(1) of the Act with effect from 01/04/2002, while calculating deduction under Chapter VI-A of the Act.

Summary

Issues:
1. Interpretation of depreciation rules under Section 32(1) of the Income Tax Act for deduction under Chapter VI-A.
2. Application of Section 80IA and the explanation inserted with effect from 01.04.2002 to section 32 for deduction under Chapter VIA.

Issue 1: Interpretation of Depreciation Rules under Section 32(1)
The High Court addressed multiple appeals challenging judgments by the Income Tax Appellate Tribunal regarding the allowance of depreciation under Section 32(1) of the Income Tax Act for deduction under Chapter VI-A. The Court considered the question of law whether depreciation, whether claimed or not, should be imposed on the assessee even before the insertion of Explanation 5 to Section 32(1) with effect from 01/04/2002. The Court referred to a previous decision in Tax Appeal No. 93 of 2000 where the issue was decided in favor of the assessee. The Court examined the arguments presented by the advocates and analyzed the relevant legal precedents. The Court concluded that the issue was already settled in favor of the assessee and against the revenue. The Court cited a detailed decision from a previous case to support its ruling, emphasizing that depreciation is optional for the assessee, and the Assessing Officer cannot allow it if the assessee chooses not to claim it. Therefore, the Court allowed the appeals, holding that the Tribunal was not correct in imposing depreciation on the assessee, whether claimed or not, prior to the mentioned amendment.

Issue 2: Application of Section 80IA and Explanation to Section 32
In a separate appeal, the Court examined the interpretation of Section 80IA and the explanation inserted with effect from 01.04.2002 to Section 32 of the Income Tax Act for the purpose of deduction under Chapter VIA. The Court considered the arguments presented by the advocates, including references to relevant legal decisions. The Court highlighted the importance of legal precedents, including a Full Bench decision of the Bombay High Court, in determining the application of the law to the case at hand. The Court noted the arguments put forth by both sides, emphasizing the significance of previous court rulings in similar matters. Ultimately, the Court concluded that the decision of the Bombay High Court cited by the revenue was not applicable to the facts of the case. The Court referenced specific findings of fact recorded by the CIT(Appeals) to support its decision. Based on the analysis and legal principles discussed, the Court held that the Tribunal's interpretation of the law was not correct, and the appeals were allowed in favor of the assessee.

This comprehensive judgment by the Gujarat High Court addressed key issues related to the interpretation of depreciation rules under Section 32(1) of the Income Tax Act and the application of Section 80IA and related explanations for deductions under Chapter VI-A. The Court's detailed analysis, reference to legal precedents, and consideration of arguments presented by the parties resulted in a clear ruling in favor of the assessee, highlighting the importance of legal clarity and consistency in tax matters.