2016 (8) TMI 955 - HC - Income Tax

Admissibility of depreciation - claiming deduction u/s.80IA - whether Tribunal was right in law in holding that depreciation though allowable but not claimed in the return for normal computation of income has to be allowed while computing the deductions under Chapter VI A of an industrial undertaking? - Held that - The controversy raised in these appeals stands settled by a Division Bench judgment of this Court in the case of Sakun Polymers Ltd. v. Joint Commissioner of Incometax 2015 (1) TMI 484 - GUJARAT HIGH COURT wherein it has been held that depreciation is optional to the assessee and that once the assessee chooses not to claim it, the Assessing Officer cannot allow while computing the income. Revenue could not controvert the aforesaid submission nor could he point out any distinguishing feature which may warrant a different view - Decided in favour of assessee

Summary

Issues involved:
1. Whether depreciation not claimed in the return for normal computation of income has to be allowed while computing deductions under Chapter VI A of an industrial undertaking?
2. Whether the effect on the Written Down Value of assets due to non-claiming of depreciation in normal computation of income should be allowed as a deduction while computing income for Chapter VI A?

Analysis:
1. The case involved Tax Appeals under Section 260A of the Income Tax Act, 1961 against a common order passed by the Income Tax Appellate Tribunal. The substantial questions of law raised revolved around the allowance of depreciation not claimed in the return for normal computation of income while computing deductions under Chapter VI A of an industrial undertaking.
2. The assessee, a private limited company engaged in manufacturing, had filed its return of income declaring 'NIL' income after claiming deductions under section 80IA. The assessment disallowed the claim under section 80IA, leading to appeals before the CIT(A) and subsequently before the Tribunal, which were dismissed.
3. The controversy was argued based on a Division Bench judgment of the Court in a similar case, where it was held that depreciation is optional for the assessee. Once the assessee chooses not to claim it, the Assessing Officer cannot allow it while computing income. The Revenue failed to provide any distinguishing feature to warrant a different view.
4. Ultimately, the Court ruled in favor of the assessee, stating that depreciation not claimed in the return for normal computation of income must be allowed while computing deductions under Chapter VI A. The second question was answered in favor of the assessee as well, as it was consequential to the first question. The appeals were disposed of accordingly.