9911796707
TMI Blog1992 (11) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 87,453 from the capital computation for the purposes of deduction under section 801 of the Income-tax Act, 1961. The Appellate Assistant Commissioner, however, allowed this amount to be included in the capital computation for the purpose of section 801. And he also allowed the assessee's claim for depreciation. This decision has been upheld by the Tribunal. Hence, at the instance of the Commissioner of Income-tax, the following two questions of law have been referred to us : "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that depreciation allowance under section 32(1) and deduction under section 35(1)(v) of the Act were disjunctive and cumulative and that the assessee-company was entitled to depreciation on the capital expenditure incurred by it on the assets used by it for scientific research and development purposes, and directing the Income-tax Officer to allow full depreciation on such capital assets even though full deduction was given to it on the said assets under section 35 in respect of earlier years and the assets under reference continued to be used for scientific research only ? 2. Whether, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er specified in sub-section (1A). . . . (1A)(1). For the purposes of this section, the capital employed in an industrial undertaking or the business of a hotel shall . . . . be computed in accordance with clauses (11) to (IV). . . . (II) The aggregate of the amounts representing the values of the assets as on the first day of the computation period . . . . shall first be ascertained in the following manner :- (i) in the case of assets entitled to depreciation, their written down value ; (ii) in the case of assets acquired by purchase and not entitled to depreciation, their actual cost to the assessee ; (iii) in the case of assets acquired otherwise than by purchase and not entitled to depreciation, the value of the assets when they became assets of the business ; . . Explanation 1.-In this clause, 'actual cost' has the same meaning as in clause (1) of section 43. In the present case, in view of the Supreme Court judgment in Escorts Ltd. v. Union of India [1993] 199 ITR 43, it is now an accepted position that, in respect of the assets in question which are used for scientific research and development on which deduction is granted under section 35, no depreciation can be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether, under section 35 of the Income tax Act, 1961, prior to its retrospective amendment, any deduction which was granted would be in addition to the deduction permissible to the assessee under section 32 of the Income-tax Act or whether a deduction granted under section 35 of the Income-tax Act would bar the assessee from claiming any deduction under section 32 of the Income-tax Act. The question which the Supreme Court considered was (at page 54) : "Were the earlier statutory provisions capable of only one interpretation, namely, that placed by the assessees or was there any ambiguity in relation thereto ?" After considering the nature of deduction granted under sections 32 and 35, the Supreme Court said (at page 49) : "....if these two provisions are applied simultaneously, it would result in granting an assessee a double allowance in respect of the same expenditure-one, of the entire amount over a period of five years and the other, a percentage of the expenditure over a number of consecutive years at a graded scale. . . . " It said that deductions under sections 32 and 35 were basically of the same nature intended to enable the assessee to write off certain items of capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80C to 80U. " These are additional deductions. They are quite different in kind from deductions which fall under Chapter IV. Under section 80J, what is provided is an additional deduction which is calculated as a percentage of the capital employed by the assessee in certain undertakings as set out in section 80J. Section 80J(2A)(11) prescribes the manner of ascertaining the value of such capital assets. The assets which are to be taken into account or computation of capital are also specified in that section. These include under clause (i) of section 80J(1A)(11) assets entitled to depreciation. In that case, their written down value has to be taken into account. It also includes assets which are acquired by purchase and which are not entitled to depreciation, such as assets in the present case. In the case of such assets, we have to take into account the actual cost of such assets to the assessee. Since the assets are acquired by the assessee by purchase, the actual cost would certainly include at least the price of those assets to the assessee, though it may also include something more as we have pointed out earlier. This section also includes in addition, assets which may be acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of such assets. The argument is attractive. But we need not go to the length of accepting it. Because even otherwise, looking to the scheme under section 80JH there is a clear provision for the assets which have to be taken into account and the manner in which the value of such assets has to be determined. This does not take into account any indirect reduction in the cost of such assets to the assessee by any deduction which may be allowed to him on such assets under section 35. Our attention in this connection was also drawn to section 43(1) which is incorporated in section 80J by virtue of Explanation 1 to section 80J(1A). Under section 43(1), actual cost is defined to mean "the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority". The definition does not include any reduction in such cost by virtue of a deduction such as under section 35. Therefore, in the present case, actual cost has to be determined as the price paid by the assessee for the assets. Explanation 1 to section 43(1) provides : "Where an asset is used in the business after it ceases to be used f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
