Tuesday, 8 September 2015

Whether it is optional for assessee to claim depreciation and also to claim it only on certain blocks of asset and if assessee is not desirous of claiming, it cannot be foisted on him - YES: HC

THE contention before the Bench is - Whether it is optional for assessee to claim depreciation and to claim it only on certain blocks of asset and if assessee is not desirous of claiming, it cannot be foisted on him. YES is the answer.
Facts of the case
The assessee concern filed its return of income declaring losses. An assessment u/s 143(3) was completed and AO determined the loss at Rs.1,65,52,578/- by including the depreciation of Rs.1,32,57,504/- though the assessee had not claimed the depreciation. This appeal was contested up to the Tribunal, which decided against the revenue and in favour of the assessee. CIT(A) had noted that the decision of CIT v. Mother India Refrigeration (P) Ltd. relied on by AO was not applicable in the instant case as the issue as to whether depreciation is optional or not was never before the Supreme Court. The second decision of Madras High Court in the case of Dasa Prakash Bottling Co. v. CIT will also not be applicable as the Gujarat HC, which was jurisdictional High Court in the case of CIT v. Arun Textiles 192 ITR 700 did not agree with this decision. In the case of Arun Textiles, the Gujarat HC held that there was nothing in the provisions of section 32(1) read with section 29, to indicate that even when no claim is made for allowing deduction in respect of the depreciation u/s 32(1), the ITO was bound to allow a deduction.
Held that,
++ under the scheme of the Act, income is to be charged regardless of depreciation on the value of the assets and it is only by way on an exception that section 32(1) grants an allowance in respect of depreciation on the value of the capital assets enumerated therein. There is intrinsic evidence u/s 43(6)(b) in the expression less all depreciation actually allowed to show that it is not as if all allowable deductions are to be granted by ITO even when the assessee does not want the same. Subsection (2)(a) of Section 143(3) provides that an assessee can object to such deduction made u/s 143(1). Therefore, the assessee can come forward in such a case and make clear its intention that it does not want to compute depreciation on the assets and wants no benefit of claiming any depreciation in respect thereof. The Circular of CBDT directed that, where the required particulars have not been furnished by the assessee and no claim for depreciation has been made in the return, ITO should estimate the income without allowing depreciation allowance. Respectfully following the decision of the Gujarat High Court, I hold that the depreciation is optional to the assessee and once he chooses not to claim it, the AO cannot allow it while computing the income. Further, once the depreciation is option, applying the same ratio of Gujarat HC and other Courts, it will be optional for block of assets also. It is not necessary that the depreciation is allowable not allowable as a whole. The assessee can claim it partly also in respect of certain block of assets and not claim in respect of other block of assets. I, therefore, direct the AO to withdraw depreciation allowance of Rs. 85,24,227/- not claimed by the appellant. In view of the aforesaid position of law settled by two Division Bench judgments of this Court we do not find any substance in this appeal and the questions framed for our consideration are answered in the negative. We hold that it is optional for the assessee whether or not to claim the depreciation and we further hold that the authorities below were right in law in holding that the depreciation which the assessee was not desirous of claiming cannot be foisted on him. Accordingly, the appeal is decided against the revenue and in favour of the assessee

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