1988 (6) TMI 61 - AT - Income Tax

Summary

Issues:
1. Investment allowance on foreign exchange difference treated as capital expenditure.
2. Granting depreciation without claim in the return and setting off brought forward losses.
3. Deduction under s. 80MM not granted.
4. Quantification of relief under s. 35B.
5. Allowing current year depreciation before setting off brought forward losses.

Analysis:

1. The first issue in this appeal pertains to the claim of investment allowance on the foreign exchange difference treated as capital expenditure. The assessee contended that the exchange loss should be eligible for investment allowance as it increased the cost of the capital asset. However, the tribunal held that the provisions of s. 32A are explicit and do not allow for investment allowance in any year other than the year in which the plant or machinery was installed. Despite previous tribunal decisions supporting the assessee's view, the tribunal found the claim untenable based on the clear provisions of the law.

2. The second issue revolves around the grant of depreciation without a claim in the return and the setting off of brought forward losses against available income. The assessee argued that the claim of depreciation was withdrawn by filing a revised return, and the ITO erred in allowing depreciation not claimed in the revised return. The tribunal considered various decisions cited by the assessee but ultimately held that depreciation allowance is statutory, and the ITO has the authority to grant it even if not claimed, as it is essential for determining the true profits and gains of the business.

3. The third issue raised was the denial of deduction under s. 80MM, which was not pressed during the appeal hearing and hence was not considered by the tribunal.

4. The fourth issue concerning the quantification of relief under s. 35B was not pressed at the time of appeal hearing and was thus not addressed by the tribunal.

5. The fifth issue involved the allowance of current year depreciation before setting off brought forward losses of earlier years against available income. The tribunal rejected this ground based on the decision of the Supreme Court in a related case, emphasizing the statutory nature of depreciation allowance for determining taxable income.

In conclusion, the tribunal dismissed the appeal, upholding its decisions on the various issues raised by the assessee, including the investment allowance, grant of depreciation, deduction under s. 80MM, relief under s. 35B, and the order of setting off brought forward losses against current year income.