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TMI Blog1984 (5) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... wish to claim depreciation and that the assessment should be completed without considering the depreciation. The object in making this claim, which may appear on the very face of it extraordinary, is to secure the benefit of set off of the unabsorbed development rebate of the earlier years which is time-bound as against depreciation which could be carried forward till it is absorbed. In making this claim, the assessee-company placed reliance upon the Special Bench decision rendered by the Bombay Bench 'A' of the Tribunal in the case of Someshwar Sahakari Sakhar Karkhana Ltd. v. ITO [1982] 1 SOT 81. The ITO rejected the assessee's request and completed the assessment by allowing depreciation. According to the ITO, the claim of the assessee was not acceptable because in order to arrive at the correct profit of a particular year, deduction towards depreciation for that year should necessarily be made and even if the prescribed particulars were not furnished, the ITO could gather the same on his own and allow depreciation. Dealing with the argument of the assessee that while filing the revised return, the claim was withdrawn, the ITO seemed to have thought that first the revised return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uraged and development of industries proceed in desired directions keeping in view the general condition and welfare of the society as a whole. It is, therefore, necessary that those provisions should be viewed more liberally so that the intention of the Legislature reaches the assessees and not defeated. It is against this view expressed by the Commissioner (Appeals) that the department has filed this appeal. 4. The first contention of the revenue is that the Commissioner (Appeals) was not justified in ignoring the decision of the Madras High Court which, according to the revenue, is a direct decision in the case of Dasaprakash Bottling Co.. As a corollary to that argument, the revenue contended that having regard to the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, the allowance of depreciation is a statutory deduction admissible under section 32 of the Act and that the ITO was bound by law to allow the same even though the assessee did not ask for it. Then comes the third argument that having regard to the ratio of the decision in the case of Monogram Mills Co. Ltd. v. CIT [1982] 135 ITR 122 (Guj.) and CIT v. Malwa Sugar Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in a way helped the assessee's case and not the revenue's case. An observation made by the High Court by way of deriving support to its main conclusion cannot be taken to be the ratio decidendi of that case bereft of the facts that gave rise to that decision. The Madras High Court decision is an authority, according to him, for the proposition that even if the assessee did not file the particulars of depreciation in the beginning but filed them later under protest, the ITO is not disempowered to took into them because his duty is to determine the income statutorily for which purpose the statutory deductions have to be allowed. That decision is not an authority for the proposition that when a revised return was filed withdrawing the claim for depreciation particularly pointing out that the particulars filed originally should be ignored, the ITO is still empowered to look into the original return and basing upon these particulars furnished, allow the claim of depreciation. This, according to him, is not the ratio of the decision and, therefore, the reliance of the revenue on that case is totally misplaced. Then, a reference was made to another decision of the Madras High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o distinguish the Supreme Court decision relied upon by the departmental representative in Delhi Cloth General Mills Co. Ltd.'s case by pointing out that decision rendered under the U.P. Agricultural Income-tax Act, 1948, whose language is not in pari materia with the language used under section 139(5) cannot be read as laying down a rule applicable under the income-tax proceedings also. 6. The departmental representative, in reply, relying upon the decision of the Gujarat High Court in Monogram Mills Co. Ltd.'s case reiterated his claim that once the priorities for allowance of depreciation, etc., were fixed under the statute, whatever may be the other consequences, that priority must be followed if violence is not to be done to the statute. He pointed out that incentives granted under the Act are different from the depreciation which is an expense represented by the diminution of the value of the capital by wear and tear of the assets for the use of its business. That expense or loss of capital is to be differentiated from the incentives given under the statute. While the expenses must be allowed, the incentives can or cannot be allowed depending upon the fulfilment of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently is only an option. The exercise of an option even erroneously could not amount to a wrong statement. This argument was not accepted by the Special Bench there and was rejected. The Special Bench held that it was settled law that when an assessee filed a revised return, he, in fact, admits that the original return filed by him was not correct or complete and substituted the same by a revised return which, according to him, was correct and complete, that the effective return for the purpose of assessment was the return which was ultimately filed by the assessee and assessment had to be made on that basis. The Special Bench's attention was invited to the decision of the Allahabad High Court in the case of Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236, where the Allahabad High Court held that once a revised return was filed, the original return must be taken to have been withdrawn and substituted by the revised return. The argument similar to the one addressed before us based upon the Supreme Court decision in Delhi Cloth General Mills Co. Ltd.'s case, does not appear to have been advanced before the Special Bench. In the case before the Supreme Court in Delhi Cloth Gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not only be open to the assessee to change the option every year but even to change the option during the year by filing a fresh return for the same year and this argument was accepted by the Supreme Court by observing that there was considerable force in this contention. With the following observations the Supreme Court did not agree with the view of the Division Bench of the Allahabad High Court which held to the contrary : ". . . In fact, rule 5 is obligatory and makes it incumbent upon an assessee to file along with his return of income a declaration in Form No. A.I.T.---2 indicating his option under section 6(1) of the Act and as such the exercise of such option including a change of the option indicated in the declaration filed along with a subsequent return or a fresh return or a revised return will be valid provided the return itself is validly submitted. In this view of the matter it is not possible to accept the view of the Division Bench of the High Court that if once option is exercised by an assessee by filing the requisite declaration along with his return for a particular year he will have no right to change his option by filing a fresh return or a revised re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in substitution thereof and it is that return that has to be taken into account for the purpose of making the assessment. This is settled law and we do not have to refer to any authorities on the subject. 9. Now it is to be seen whether the filing of a revised return withdrawing the claim for depreciation makes any difference for the application of the rule laid down by the Madras High Court in the case of Dasaprakash Bottling Co. If the effect of filing a revised return is to obliterate the return filed along with all the statements accompanying that return, then there are no prescribed particulars before the ITO to allow depreciation because along with the revised return, the assessee did not furnish the prescribed particulars. The question then would be whether the ITO could look into those particulars. In our opinion, it is not open to him to look into those particulars at all once the revised return is held to be a valid, genuine and legal document. The next question would be whether the ITO would be entitled to grant depreciation even if the particulars are not furnished. There is a specific injunction against the grant of depreciation unless the prescribed particulars are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished by the assessee and the fact that it was done under protest is of no significance as far as the requirements of section 34 are concerned. Section 34 does not state that the particulars should be furnished in the return and that too the assessee should do so on his own without any prompting by the officer. . . . " Even though the earlier observation does appear in conflict with the later observations now quoted above, the allowance of depreciation was eventually upheld by the High Court because the prescribed particulars were furnished by the assessee, though under protest. The position would have been entirely different, as seen from the judgment of the Madras High Court, if the prescribed particulars were not at all furnished by the assessee. There is another point which has to be borne in mind, namely, in the earlier part of the judgment, the High Court pointed out why the assessee was indulging in the self-denial of a statutory deduction available under the law was not clear, meaning thereby that were it clear to the High Court as to why the assessee was not claiming depreciation, the position would have been different. Here, in the case before us, the assessee clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It does not mean that the ITO should suo motu go about and find out the claims that could be made by an assessee but not made and then allow them. We do not think it is a proper understanding of the law or the functioning of the Act. If so, how do we proceed about the residuary allowances allowable under section 37 ? What applies to section 32 must also apply to section 37. Is it possible for the ITO to find out what are the admissible deductions under section 37 and allow them ? Should not the allowance of the claim, therefore, depend upon the claim by the assessee and furnish the necessary particulars in support thereof ? If the law is that the ITO should allow expenditure like depreciation even if not claimed, as in the present case, how can he proceed to allow expenditure, if the allowance is subject to satisfaction of certain legal requirements, which the assessee alone could furnish ? The assessee, when required to submit information does not comply, what should the ITO do ? Should he allow the expenditure, though the legal requirements are not satisfied, or should he disallow ? In the former case, he is acting against law ; and in the latter, he assesses not the real income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory duty of the ITO to compute the real income. As we have noticed earlier, the Special Bench of the Tribunal, dealing with identical facts, held that it is not open to the department to force the relief on the assessee, more particularly when prescribed particulars were not available. That is also a case where a revised return was filed as in the present case before us. The Special Bench also laid down there that the allowance of the depreciation is not in the nature of an unconditional benefit granted by the law. It is a benefit coupled with a condition and, therefore, it should be open to the assessee to claim or not claim the benefit. In this connection, we may also refer to the CBDT Circular No. 29-D(XIX-14) [F. No. 45/239/65-ITJ], dated 31-1-1965 which was specifically on the question of estimate of net profits and allowability of depreciation allowance. In para 3, the following instructions were issued : " Even where best judgment is made, the above procedure should be adopted provided the required particulars have been furnished by the assessee. In cases where required particulars have not been furnished by the assessee and no claim for depreciation has been made in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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