2010 (3) TMI 1277 - HC - Income Tax

Summary

Issues involved:
The issues involved in this case are related to the claim of depreciation by the assessee, withdrawal of depreciation claim in the revised return, interpretation of the Finance Act 2001, and the applicability of Explanation 5 to Clause (ii) of Section 32(1) of the Income Tax Act, 1961.

Summary:

Claim of Depreciation:
The appellant-revenue appealed under section 260A of the Income Tax Act, 1961, questioning the Tribunal's decision to allow the assessee to withdraw the claim for depreciation in the revised return for the Assessment Year 1999-2000. The appellant contended that the Tribunal erred in reversing the decision of the Commissioner (Appeals) and allowing the assessee to withdraw the depreciation claim.

Revised Return and Withdrawal of Depreciation Claim:
The respondent-assessee initially filed a return of income for Assessment Year 1999-2000 showing a loss, which was later revised to withdraw the claim for depreciation based on a Supreme Court decision. The Assessing Officer did not accept the withdrawal and assessed the income considering the depreciation claimed in the original return. The Commissioner (Appeals) upheld this decision, but the Tribunal ruled in favor of the assessee, allowing the withdrawal of the depreciation claim.

Interpretation of Finance Act 2001:
The appellant argued that the Finance Act 2001, amending the provisions related to depreciation, made it mandatory to apply subsection (1) of Section 32 regardless of whether the assessee claimed depreciation. However, the Tribunal relied on precedents to support the assessee's right to withdraw the depreciation claim in a revised return.

Applicability of Explanation 5 to Section 32(1):
The Tribunal referred to decisions by High Courts and the Supreme Court, emphasizing that once the assessee validly withdraws the claim for depreciation, it cannot be enforced by the Assessing Officer. The Tribunal concluded that in the Assessment Year 1999-2000, the amended provisions of section 32 did not apply, and the assessee's withdrawal of the depreciation claim was justified.

Conclusion:
The Tribunal's decision was upheld, dismissing the appeal with no costs, as there was no legal error found in the Tribunal's order regarding the withdrawal of the depreciation claim by the assessee in the revised return for the Assessment Year 1999-2000.