2019 (11) TMI 604 - HC - Income Tax

Mandatory for depreciation to be granted while determining the deduction u/s 80IB - Appellant had not claimed such depreciation - HELD THAT - There is really no conflict as such in the decisions of this Court in the cases of Grasim Industries Limited 2000 (4) TMI 28 - BOMBAY HIGH COURT and Indian Rayon Corporation Ltd. vs. CIT 2003 (1) TMI 58 - BOMBAY HIGH COURT which is in fact the decision followed in Scoop Industries Pvt. Ltd. 2006 (10) TMI 75 - HIGH COURT, BOMBAY . The Full Bench has held that the ratio laid down in both the cases, is in consonance with the ratio laid down by the Hon'ble Apex Court in the case of Distributors (Baroda) P. Ltd. vs. Union of India 1985 (7) TMI 1 - SUPREME COURT . Upon analysis of the legal position, the Full Bench concluded that for the purposes of deduction under Chapter VIA, the gross total income has to be computed inter alia by deducting the deductions allowable under Section 30 to 43D of the Act, including depreciation allowable under Section 32 of the Income Tax Act, even though the Assessee may have computed the total income under Chapter IV by disclaiming the current depreciation. This, according to us, affords a full answer to the substantial question of law, now pressed in this Appeal. - Decided in favour of revenue

Summary

Issues:
1. Validity of Assessment Order under Section 143(3) read with Section 147 of the Act.
2. Mandatory grant of depreciation for deduction under Section 80IB of the Act.

Analysis:

*Issue 1: Validity of Assessment Order under Section 143(3) read with Section 147 of the Act*
The appeal was admitted based on the substantial questions of law regarding the validity of the Assessment Order dated 28th February, 2005. The ITAT upheld the validity of the Assessment Order, leading to a challenge in the High Court. The appellant's counsel emphasized the importance of determining the legality of the Assessment Order, which was a crucial aspect of the case. The reliance on previous judgments and the need for clarification on conflicting decisions highlighted the complexity of the legal issue at hand.

*Issue 2: Mandatory grant of depreciation for deduction under Section 80IB of the Act*
The second substantial question of law focused on whether depreciation should be granted for determining the appellant's entitlement to the deduction under Section 80IB of the Act, even if not claimed by the appellant. The appellant's counsel pressed for adjudication on this question, pointing out the reliance on previous court decisions and the need for clarity on the legal position. The Full Bench's analysis clarified that depreciation must be considered for computing gross total income, even if the Assessee disclaimed current depreciation. This clarification led to the dismissal of the appeal, as the ITAT's decision was in line with the legal position established by the Full Bench.

In conclusion, the High Court dismissed the appeal as the Full Bench clarified the legal position regarding the grant of depreciation for deductions under Chapter VIA. The judgment emphasized the importance of following established legal principles and resolving conflicts in court decisions to ensure consistency and fairness in tax assessments.