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TMI Blog2005 (11) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... this section, the profits and gains of the eligible business is to be computed as if such eligible business were the only source of income of the assessee. This provision overrides the other provisions of the Act which is clear from the sentence notwithstanding anything contained in other provisions of this Act . Thus, the separate computation of the profits and gains of the eligible business for the purpose of deduction under this section is the clear mandate of the Legislature. Sub-section (8) of section 80-IA provides another exception, i.e., where there is transfer of goods or services by the eligible business to any other business carried on by the assessee or vice versa and the consideration for such transfer as recorded in the accounts does not correspond to the market value of such goods, then for the purpose of deduction under this section the profits and gains of the eligible business is to be computed by taking the market value of such goods or services on the date of transfer. Therefore, though in the accounts the goods or services are transferred at a different rate and the said rate will be taken for the purpose of computation of profits and gains of business but for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, which is though allowable but not claimed in the return for normal computation of income, has to be allowed while computing the deductions under Chapter VI-A viz. sections 80HH, 80-IA, 80-IB, etc. of an Industrial Undertaking. In the result, two appeals filed by the revenue, are allowed and remaining 24 appeals filed by the assessees are dismissed. - HON'BLE R.P. GARG, VICE-PRESIDENT, G.D. AGARWAL, ACCOUNTANT MEMBER AND R.P. TOLANI, JUDICIAL MEMBER ORDER 1. The President, Income-tax Appellate Tribunal vide order under section 255(3) of the Income-tax Act, 1961 dated 7-6-2005 constituted a Special Bench for hearing all the aforesaid appeals to consider the following question: Whether, the depreciation which is though allowable but not claimed in the return for normal computation of income has to be allowed while computing the deductions under Chapter VI-A viz. sections 80HH, 80I-A, 80-IB, etc., of an industrial undertaking. 2. The facts in all the above referred cases are more or less similar. Therefore, we shall discuss herein detail the facts in the case of Vahid Paper Converters, vide ITA No. 1686/Ahd/2004. The assessee is a partnership firm engaged in the manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, it should be given to them universally without any kind of difference. The method of computation of income should be the same for the assessees, who are eligible and claiming such deduction. But this is not being followed by certain assessees. While computing eligible income of such Industrial Undertakings, certain assessees are claiming depreciation to arrive at the total income of the Industrial Undertaking since inception but certain assessees (mostly firms and individuals) are not claiming depreciation in the guise tax planning for arriving at the total income of their Industrial Undertakings. This modus operandi has been adopted by certain assessees since inception of the Industrial Undertakings and in some cases, it was adopted alter the decision of CIT v. Mahendra Mills [2000] 243 ITR 56 of the Hon'ble Supreme Court. If this modus operandi is accepted, it will be a great injustice to the assessees who are following the words of the Act in right spirit. He further observed that the intention of Legislature for allowing depreciation @ 100 per cent of the income of such Industrial Undertakings for a period of five years to develop the industrial base in the bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not furnished by the assessee, his claim for depreciation under section 32 cannot be allowed. Section 29 is, thus, to be read with reference to other provisions of the Act. It is not itself a complete code. The Supreme Court was thus of the view in Mahendra Mills' case that depreciation cannot be allowed only because of the bar contained in section 34. Even the Bombay High Court in Indian Rayon Corpn. Ltd.'s case has considered the Mahendra Mills' case and opined that it has no application. He also observed that in Mahendra Mills' case, the issue regarding special deduction was not there. The appellant, therefore, cannot derive support from the decision of the Hon'ble Supreme Court in Mahendra Mills' case. He then referred to the decision of Cambay Electric Supply Industrial Co. Ltd.'s case and observed that though, the facts of above case were different but the ratio laid down by the judgment cannot be overlooked. It has been held that The important words in section 80E(1) are those that appear in parenthesis, viz, 'as computed in accordance with the other provisions of the Act', and, since it is income from business, the same, in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [1994] 50 TTJ (Indore) 375; and (iii) Plastiblends India Ltd. v. ITO [IT Appeal No. 4542 (Mum.) of 1999, dated 10-2-2004]. The case taking a contrary view in favour of the revenue is Mandhana Exports (P.) Ltd. v. Asstt . CIT [2002] 82 ITD 306 (Mum.). Therefore, the Division Bench referred the matter to the Hon'ble President, ITAT for constitution of the Special Bench. This is how the Special Bench is constituted. 5. In all the appeals under consideration, the assessment year under consideration are assessment years 1999-2000 to 2002-03. Therefore, we are concerned with the law applicable for the period 1 -4-1988 to 31 -3-2002 because there was an amendment in the provisions relating to grant of depreciation by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 1-4-1988 whereby section 34 was omitted. Further the Finance Act, 2001 inserted Explanation 5 to section 32 with effect from 1-4-2002. 6. At the time of hearing before us, Shri S.N. Soparkar, learned Senior Advocate appeared on behalf of M/s. Vahid Paper Converters, Daman. He stated that depreciation is choice of the assessee prior to omission of section 34 by Taxation Laws (Amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2001] 73 TTJ (Ahd.) 381. It is submitted that the Gujarat High Court dismissed the Tax Appeal of the revenue against the above decision of ITAT, Ahmedabad Bench vide Income-tax Appeal No. 175 of 2001. 8. He stated that Explanation 5 to section 32 is not retrospective. In support of his contention, he relied upon the decisions in CIT v. Sree Senhavalli Textiles (P.) Ltd. [2003] 259 ITR 77 (Mad.) and CIT v. Kerala Electric Lamp Works Ltd. [2003] 261 ITR 721 (Ker.). 9. The learned counsel further contended that the language of section 29 and section 80AB are similar, viz., for the purpose of computing deduction under Chapter VI-B, the income of the assessee is to be computed in accordance with the provisions of this Act before making any deduction under Chapter VI-B. That as per section 29 also the income under the head 'Profits and gains of business', is to be computed as per sections 30 to 43D. Under both the provisions the income is to be computed as per the computation provisions for computing the income under the head 'Profits and gains of business', which include section 32. Therefore, the different principle will not be applicable for' computing the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1992] 198 ITR 297 and contended that the observation of the Court has to be understood in the light of question before the Court. It is neither desirable nor permissible to pick a word or sentence from a judgment of the Court divorced from the context of the question under consideration and treat it to be complete law declared by the Court. He, therefore, contended that the decision of the Bombay High Court in the case of Indian Rayon Corpn. Ltd. would be applicable only when the facts are identical and not otherwise. The learned counsel also referred to and distinguished the decisions of the Supreme Court in the cases of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 and Mettur Chemical Industrial Corpn. Ltd. v. CIT [1996] 217 ITR 768. He also stated that the decision of the Tribunal Mumbai Bench in the case of Mandhana Exports (P.) Ltd. v. Asstt. CIT [2002] 82 ITD 306 does not lay down the correct law. In view of above, he contended that the income of the Industrial Undertaking for the purpose of computing deduction under section 80-IB should be worked out without allowing depreciation which is not claimed by the assessee. 12. Shri S.N. Divatia, the learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um.) 328 and Asstt. CIT v. Gujarat State Fertilizers Co. Ltd. [2000] 68 TTJ (Ahd.) 862. He reiterated that the gross total income computed under the head 'Profits and gains of business' has to be adopted for allowing deduction under Chapter VI-A. There cannot be two separate calculations, one for business income and other for Chapter VI-A. 16. Shri S.N.L. Agarwala, who appeared for some of the assessees mentioned in Cause Title, relied upon the decision of the Supreme Court in the case of CIT v. Mahendra Mills [2000] 243 ITR 56. He submitted that the above decision of the Supreme Court would be squarely applicable for the purpose of computation of income for allowing deduction under section 80-IB. The option is with the assessee to claim or not to claim the depreciation. He further submitted that when the Legislature wanted to give different meaning to the normal profits and gains of business for computing deduction under Chapter VI-A, it has clearly provided in the relevant section. For example, Explanation (baa) to section 80HHC(3) defines the words 'Profits and gains of business' but when there is no separate definition of the words 'Profits and gains of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds India Ltd. He has also relied upon the decision of the Supreme Court in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 in support of his contention that it is the right of the assessee to minimize his tax liability. 18. The learned DR, on the other hand, submitted that the decision of the Supreme Court in the case of Mahendra Mills was applicable till 1-4-1988. He stated that in the above decision itself the Supreme Court has mentioned that the law laid down by them would be applicable till 1-4-1988. 19. It is contended by the learned DR that the depreciation is not being claimed by the assesses for claiming higher deduction under Chapter VI-A. Therefore, it is not a case where the assessees are foregoing their privilege. On the other hand, by not claiming the depreciation, the assessees have tried to gain double advantage, i.e., to claim higher deduction under section 80-IB and at the same time do not reduce the value of their assets so as to entitle them to claim higher depreciation when the period of allowability of deduction under section 80-IB or 80-IA which are permissible to the new Industrial Undertaking for a limited period is over. He contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords clearly prove that insertion of Explanation is only explanatory. He, therefore, submitted that the orders of the Assessing Officer in all the cases should be sustained. 21. In the rejoinder, Shri S.N. Soparkar, the learned Senior Advocate stated that the use of words for removal of doubt' does not necessarily mean that the provision is retrospective. In support of this contention, he relied upon the decisions in CIT v. Patel Bros. Co. Ltd. [1995] 215 ITR 165 (SC) and Asstt. CCE v. Dunlop India Ltd. [1985] 154 ITR 172 (SC). 22. We have carefully considered the rival submissions and perused the material placed before us. From the question referred to us it is clear that the assessees are entitled to depreciation but have not claimed the same in the returns of income for normal computation of income. The limited question that remains is whether the Assessing Officer in that case can allow and deduct the depreciation while determining the income derived from Industrial Undertaking for the purpose of computing the deduction under Chapter VI-A. SCHEME OF THE ACT 23. In order to deal with the issue we have to examine the scheme of the Act for granting deduction under this Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It provides for relief of 20 per cent of profits. Sub-section (1) of this section reads Where the gross total income of an assessee includes any profits and gains derived from an Industrial Undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. It may be noted that the deduction is from such profits and gain as are included in Gross Total Income and it is equal to 20 per cent of the profits so included. Sub-section (6) provides for certain specific adjustments for computing the profits of an Industrial Undertaking where any goods held for the purposes of the business of the Industrial Undertaking are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the Industrial Undertaking and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the Industrial Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date. Again sub-section (10), like sub-section (7) of section 80HH, provides that where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. 28. The other section involved in these appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive an indication that it is not the choice of the assessee to show a larger profit than what is reasonable and the eligible income is to be arrived at irrespective of the agreement of the parties and in accordance with the provisions of the Act and after taking into consideration the prevailing market price of the goods services. 31. The jurisdictional High Court has considered the identical issue in the case of CIT v. Cadila Chemicals (P.) Ltd. [2003] 259 ITR 692 (Guj.) and observed after quoting section 80AB held that the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is includible in the gross total income meaning thereby depreciation will have to be deducted before making any deduction under section 80HH. 32. The Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd., which is incidentally relied upon by the revenue as well as by the assessees' counsel, dealt with the issue as how the income for the purposes of this Chapter is to be computed. In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cter, will have to be taken into account and included as income of the business. 33. And in dealing with the set off of carried forward depreciation and development rebate, it was held at page 94 of the Report as under: Here again the answer to the question must depend upon the construction of sub-section (1) of section 80E and the construction which we have placed on the said provision while disposing of the revenue's appeal will furnish the correct answer to the question posed. As indicated earlier, sub-section (1) contemplates three steps being taken for computing the special deduction permissible thereunder and arriving at the net income exigible to tax and the first two steps read together contain the legislative mandate as to how the total income-of which the profits and gains attributable to the business of the specified industry forms a part - of the concerned assessee is to be computed and according to the parenthetical clause, which contains the key words, the same is to be computed in accordance with the provisions of the Act except section 80E and since in this case it is income from business the same will have to be computed in accordance with sections 30 to 43A wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Cambay Electric Supply Industrial Co. Ltd. Therefore, the ratio of the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. would be squarely applicable for the purpose of determining the eligible income for the purpose of computing the deduction under Chapter VI-A(C). The distinction attempted by the ld. counsel in our opinion is, therefore, of no avail. 36. The controversy, however, is no longer res integra and the above decision is followed by the Supreme Court in a later case of Mettur Chemical Industrial Corpn. Ltd., even in a case where the dispute was whether the development rebate has to be deducted or not from the total income for the purpose of determining the profits eligible for deduction under section 84(1). At page 774, their Lordships have held as under: Coming to the third question, the relevant fact as already stated is that the profit with reference to the additional unit of sixty hooker cells which was called caustic soda plant No. 2 was worked out by the appellant at ₹ 1,08,282 before allowing the development rebate. The development rebate pertaining to this second plant came to ₹ 12,15,055. If the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961. We may also add that with effect from 1-4-1989, Parliament inserted section 80AB laying down that where any deduction is required to be made or allowed under any section in Chapter VI-A under the heading 'Deductions in respect of certain incomes', then, not withstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed under the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is includible in the gross total income meaning thereby depreciation will have to be deducted before making any deduction under section 80HH. 39. Similar issue came up before the Rajasthan High Court in the case of Vijay Industries v. CIT [2004] 270 ITR 175 again with regard to computation of eligible profits for the purpose of section 80HH. The claim of the assessee was that for computing the profits and gains of Industrial Undertaking, unabsorbed depreciation, current depreciation and investment allowance should not be considered. The High Court di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its for Chapter VI-A, because if the depreciation is not reduced while computing the income, the assessee would claim on gross amount of income and that would be amount to making a more deduction than what he is entitled to. OPTION TO CLAIM OR DISCLAIM DEPRECIATION 42. It was, however, contended by the assessee's counsel Shri Soparkar that the above decisions would be applicable where the depreciation has been claimed by the assessee and would not be applicable where an assessee has disclaimed the same. He stated that depreciation can be allowed while computing eligible income for the purpose of Chapter VI-A only if while computing normal income under the head 'Profit and Gains of business', the assessee claimed depreciation. We are unable to accept this contention. In the Income-tax Act there is no provision for 'disclaimer' of depreciation. Moreover, the Bombay High Court has directed for allowing depreciation while computing deduction under section 80HH not on the ground that the assessee claimed depreciation while computing its business income. They have allowed depreciation because, for the purpose of computing deduction under Chapter VI-A, the amount of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 80HH, without taking into consideration the current depreciation will have to be rejected. 44. On behalf of the assessees, heavy reliance has been placed on the decision of the Supreme Court in the case of Mahendra Mills in support of claiming/disclaiming depreciation. However, we find that the above decision given by the Supreme Court was for assessment year 1974-75, when section 34 was on the statute book, which is omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 with effect from 1-4-1988. As per section 34, the assessee was entitled to depreciation under section 32 only if the prescribed particulars have been furnished by the assessee. At page 80 of the Report, their Lordships have held as under: Section 34 is not in the nature of merely an enabling provision. In the absence of particulars of depreciation as required by section 34, there is no mandate on the Income-tax Officer under section 29 to compute the income by allowing depreciation under section 32. 45. Thus, their Lordships have held that in the absence of particulars of depreciation as required by section 34, there is no mandate on the ITO to allow depreciation under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation is not claimed by the assessee, by thrusting the depreciation upon the assessee the privilege would be converted into disadvantage and an option becomes obligation. 48. Apropos the above submissions of the learned counsel, it was argued by the learned DR that in the normal computation of income by claiming depreciation the assessee gets deduction from the income. Therefore, the right of claiming the depreciation may be a privilege for the assessee. But, when the deduction under Chapter VI-A is to be computed by not claiming the depreciation, the eligible income of the assessee would be more and, thus, the assessee would be entitled to higher deduction under section 80-IB. By not claiming depreciation W.D.V. of the assets would be more and assessee will have the right to claim depreciation thereon in subsequent years. Therefore, for the purpose of Chapter VI-A, it is not privilege of the assessee to claim or not to claim the depreciation. Placing reliance on the decision of Supreme Court in the case of CIT v. Mahalaxmi Sugar Mills Co. Ltd. [1986] 160 ITR 920 wherein the set off, was held to be a duty of Assessing Officer to allow, even if claimed to be option of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Supreme Court decision in the case of Sun Engg. Works (P.) Ltd. holding: It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, Courts must carefully try to ascertain the true principle laid down by the decision. 51. In the light of the above decision of the Supreme Court, we hold that the observations of the Supreme Court in the case of Mahendra Mills be taken as applicable only in the context of computing normal income for assessment years prior to assessment year 1988-89 and not for the computation of income for the purpose of Chapter VI-A. 52. On the facts and circumstances of those cases, the other decision of the Supreme Court in the case of CIT v. Mahalaxmi Sugar Mills Co. Ltd. [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. That the assessee fails to claim the benefit of a set-off cannot relieve the ITO of his duty to apply section 24 in an appropriate case. 54. In our opinion, the above observations of the Supreme Court would be squarely applicable while determining the income for the purpose of computing the deduction under Chapter VI-A. In the light of the above decision of Supreme Court, it is the duty cast upon the Assessing Officer to apply the relevant provisions of the Income-tax Act for the purpose of determining the true figure of the eligible income for the purpose of deduction under Chapter VI-A. The relevant provisions of the Income-tax Act include section 32 under which deduction for depreciation has to be allowed. Therefore, while computing the income for the purpose of deduction under Chapter VI-A, the depreciation has to be allowed whether it is claimed by the assessee or not. Cases relied upon by assessees 55. Shri S.N. Soparkar, the learned counsel for the assessees, has referred to the decision of the jurisdictional High Court in the case CIT v. Arun Textile 'C' [1991] 192 ITR 700 (Guj.) and the decision of the Bombay High Court in the case of CIT v. Shri Someshwar Sah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Supreme Court in the case of Mahendra Mills, in our opinion, the Tribunal was justified in taking the view with regard to the depreciation in the instant case and, therefore, we do not find any substantial question of law involved in this appeal and, therefore, the appeal is dismissed. 57. The Jurisdictional High Court dismissed the revenue's appeal holding that no substantial question of law arises. It is not a decision on merit by the Jurisdictional High Court. On the contrary we noted that the Jurisdictional High Court in a series of cases have taken the consistent view that for the purpose of computing deduction under Chapter VI-A, effect to all other provisions of the Income-tax Act, is to be given. The first decision is in the case of CIT v. Cambay Electric Supply Industrial Co. Ltd. [1976] 104 ITR 744 (Guj.), wherein it was held that unabsorbed depreciation and development rebate should be considered while computing eligible profit for the purpose of section 80E. This decision was upheld by the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. The second decision is in the case of CIT v. Milling Trading Co. (P.) Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the sentence notwithstanding anything contained in other provisions of this Act . Thus, the separate computation of the profits and gains of the eligible business for the purpose of deduction under this section is the clear mandate of the Legislature. Sub-section (8) of section 80-IA provides another exception, i.e., where there is transfer of goods or services by the eligible business to any other business carried on by the assessee or vice versa and the consideration for such transfer as recorded in the accounts does not correspond to the market value of such goods, then for the purpose of deduction under this section the profits and gains of the eligible business is to be computed by taking the market value of such goods or services on the date of transfer. Therefore, though in the accounts the goods or services are transferred at a different rate and the said rate will be taken for the purpose of computation of profits and gains of business but for the purpose of computing the profits and gains of eligible business for the purpose of deduction under section 80-IA, the profits and gains is to be re-computed by taking the market value of goods or services transferred to or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains of the eligible business the Assessing Officer has to give effect to the provisions of section 32 also and work out the profits and gains after allowing the depreciation. 60. In the case of Milling Trading Co. (P.) Ltd. relied upon by Shri D.H. Vadodaria in support of his contention that the income included in the gross total income has to be considered for the purpose of Chapter VI-A, the dispute was with regard to computation of special deduction under section 80M. The question was whether unabsorbed depreciation and development rebate should be taken into account or not for the purpose of computing deduction under section 80M. The following observations of the above decision in fact supports the contention of the revenue that while computing the profits and gains of business, the provisions of sections 32 and 33 cannot be ignored: While granting special deduction under section 80M two important points have to be borne in mind, namely, (1) the total income of an assessee cannot be computed in accordance with the provisions of the Act without computing his income under different heads prescribed by section 14, and (2) the computation of income under the head of 'Profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hmedabad Bench of ITAT has held that the depreciation is a choice left to the assessee and cannot be allowed when not claimed. The Tribunal has given the above finding following the decision of the Gujarat High Court in the case of CIT v. Arun Textile 'C' [1991] 192 ITR 700. We have discussed the decision in the case of Arun Textile 'C' above and found that the above decision was also prior to 1-4-1988 and in the above case also the computation of income was for normal business income and not for the purpose of eligible income for the purpose of computing the income under Chapter VI-A. On the contrary the Gujarat High Court in the case of CIT v. Cadila Chemicals (P.) Ltd [2003] 259 ITR 692 has taken the view that the depreciation will have to be deducted before making any deduction under section 80HH and, therefore, in view of this decision of the Jurisdictional High Court, the decision of the Division Bench of ITAT Ahmedabad in the case of Gujarat State Fertilizers Co. Ltd. may not be a good law. Possibility of two views 64. Lastly, the contention on behalf of the assessees that it is a settled rule of interpretation that if language of a taxing statute is capable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills, Jurisdictional High Court in the case of Arun Textile 'C', Bombay High Court in the case of Shri Someshwar Sahakari Sakhar Karkhana Ltd. 67. We have already noted earlier that all the above three decisions relied upon by the assessees are prior to assessment year 1988-89 and they were with regard to the computation of income under the head 'Profits and gains of business' and not for the purpose of computation of eligible income for the purpose of working out deduction under Chapter VI-A. In the cases under consideration before us we have reached a conclusion that the Assessing Officer has the duty as well the power to allow the depreciation while computing profit and gains of Industrial Undertaking for the purpose of deduction under Chapter VI-A. It is true that there are certain Division Benches of Tribunal have taken the view that for computing deduction under Chapter VI-A also it is the option of the assessee to claim the depreciation or not to claim. However, when the view canvassed by the revenue is supportable by the decisions of the Supreme Court, the Jurisdictional High Court and other High Courts in the sense that while working out the income for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the depreciation, which is though allowable but not claimed in the return for normal computation of income, has to be allowed while computing the deductions under Chapter VI-A viz. sections 80HH, 80-IA, 80-IB, etc. of an Industrial Undertaking. 70. Before we part with the matter, we may state that the Revenue has contended that Explanation 5 to section 32 introduced by the Finance Act, 2001 with effect from 1-4-2002 is retrospective while the learned representatives of the assessees have contended that the amendment is prospective. However, as we have come to the conclusion that the depreciation has to be allowed while computing the income for the purpose of computation of deduction under Chapter VI-A even prior to above amendment, therefore, it is unnecessary to examine the rival contentions with regard to retrospective effect of Explanation 5 to section 32 introduced by the Finance Act, 2001. 71. The following 26 appeals where other issues are also involved, they are to be placed before the Division Bench for disposal on other issues including the issue of validity of rectification by Assessing Officer under section 154, as the case may be: Sr. No. IT Appeal No. Appellant Res ..... 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