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TMI Blog2012 (11) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961 the Tribunal was justified in law in directing capitalization of the depreciation amount of Rs.5,30,93,896/- and in holding that the same could not be set off against the interest income of Rs.29,29,037/-? 2. Whether and in any event the entire highway construction expenditure including depreciation was allowable as a deduction in the assessment year 2003- 2004 notwithstanding the accounting policy followed by the appellant and the same was required to be carried forward to the subsequent years after set off against the interest income?" The short fact which is also admitted leading to preferring the appeal is as follows:- The assessee-company had been carrying on business during the relevant time, amongst other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that the assessee itself in its own account has capitalized all the expenditure under the head 'National Highway Development Expenditure' and it has mentioned in the audited balance sheet that National Highway Development Expenditure amortized over the concession period from the date of commercial operation. In the audited P/L Account no expenditure or depreciation has been claimed by the assessee. On the other hand, only interest on fixed deposit has been shown. In the computation of income the assessee has claimed deduction for depreciation against interest income, being income from other sources. The user of the assets was not for earning interest income. The assets were used for construction of National Highway. All the expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the method or system of accounting adverted to in Section 145(1). According to him irrespective of nature of maintenance of accounts under the provision of the said Act the depreciation under Section 32 thereof has to be allowed. Depreciation under Section 32(1) has to be allowed, whether it is claimed or not and this legal position would be clear if Explanation 5 of Section 32(1) which was introduced later the assessee had the option to claim or not to claim depreciation, and if depreciation was not claimed the Assessing Officer cannot thrust it upon the assessee. In other words he says that Explanation 5 to Section 32(1) has to be given effect irrespective of the fact that the assessee has not claimed any other expenditure. This position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year under consideration the assessee-company incurred huge expenditure on purchase of material, direct and indirect expenses on the development of National Highway and since the entire expenditure is revenue expenditure and it is capitalized by the assessee as per method of accounting followed by it. It cannot be allowed to turn around to claim depreciation should be treated to be revenue expenditure. The assets are owned by the assessee and used for the purpose of business, the depreciation to which the assessee is entitled under Section 32(1) and Explanation 5 thereunder has to be worked out on such assets and the same should be capitalized along with other expenditure under the head "National Highway Development Expenditure Accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the decisive factor in examining an expenditure for the purpose of income-tax. The name given to an expenditure or a nomenclature given to an expenditure in the books of account of the assessee is not the litmus test to decide the exact nature of expenditure for the purpose of income-tax. The purpose of the Companies Act is different from the purpose of the Income-tax Act. Therefore, the classification of those expenses as capital in nature for the purpose of the Companies Act, does not ipso facto make that expenditure a capital expenditure for the purpose of the Income-tax Act." In the case before Madras High Court the aforesaid decision was rendered on the factual aspect that assessee therein filed a return of income admitting a total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the assessee in case where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2) have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in Section 144. We think that the aforesaid sub-section (3) in this case has no manner of application as it is not a case here that the appellant has frequently shifting its accounting process and method. In this case the accounting system is uniform however, while filing returns the depreciation of those assets have been claimed under the provisions of the law in its return. The aforesaid two pronouncements have clearly answered this question. We feel in this case while making asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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