Case: Commissioner Of Income Tax Vs. Mahendra Mills

32 allows depreciation as deduction subject to the provisions of Section 34. Section 34 provides that deduction under Section 32 shall be allowed only if prescribed particulars have been furnished. We have seen Rule 5AA of the Rules which though since deleted provided for the particulars required for the purpose of deduction under Section 32. Even in the absence of Rule 5AA return of the income in the form prescribed itself requires particulars to be furnished if the assessee claims depreciation. These particulars are required to be furnished in great detail. There is a circular of the Board dated August 31, 1965, which provides that depreciation could not be assessee and no claim for the depreciation has been made in the return. Income-tax Officer in such a case is required to compute the income without allowing depreciation allowance. Circular of the Board dated April 11, 1955 is of no help to the Revenue. It imposes merely a duty on the officers of the department to assist the tax-prayers in every reasonable way, particularly, in the matter of claiming and securing relief. The Officer is required to do no more than to advise the assessee. It does not place any mandatory duty on the officer to allow depreciation if the assessee does not want to claim that. Provision for claim of depreciation is certainly for the benefit of the assessee. If it does not wish to avail that benefit for some reason, benefit cannot be forced upon him. It is for the assessee to see if the claim of depreciation is to his advantage. Rather Income-tax Officer should advise him not to claim depreciation if that course is beneficial to the assessee. That would be in our view the spirit of the circular dated April 11, 1955. Income under the head "profits and gains of business or profession" is chargeable to income-tax under Section 28 and that income under Section 29 is to be computed in accordance with the provisions contained in sections 30 to 43A. The argument that since Section 32 provides for depreciation it has to be allowed in computing the income of the assessee cannot in all circumstances be accepted in view of the bar contained in Section 34. If Section 34 is not satisfied and particulars 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 in itself a complete code.38. In Ascharallal Ram Parkash case [90 ITR 477] Allahabad High Court said that since it is not mentioned in Section 34 as to in what form the prescribed particulars of depreciation must be furnished and that, therefore, there is no requirement in that Section that particulars must be furnished. High Court further went on to say that merely because the form of return provides for a place where the statement of such particulars should be set out would not mean that in absence of such statement the Income-tax Officer has no power to allow the depreciation. This is contrary to the mandate of SEction 34 as well as the Board circular dated August 31, 1965. Madras High Court in Dasa Parkash Bottling Co. case [122 ITR 9 ] following Allahabad High Court in the case of Ascharajlal Ram Prakash said that Income-tax Officer can disallow the claim of depreciation if the assessee did not furnish the prescribed particulars. It further went on to hold that it would be open to the Income-tax Officer to grant depreciation even if the assessee had not furnished the prescribed particulars. In this case the assessee did not give the particulars relating to depreciation in the return form not did it claim depreciation. On being called upon by the Income-tax Officer to furnish necessary particulars the assessee in response thereto furnished the particulars under protest. On that basis the Income-tax Officer granted the depreciation. We do not think that the views expressed by the Madras High Court lay down correct law. 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. In the second Madras Case CIT v. Southern Petro Chemicals Industries Corporation Ltd., 233 ITR 400 the assessee did claim depreciation but he withdrew the same in the revised return. On that basis it was held that since the assessee had furnished the particulars regarding the claim of depreciation in the original return the assessee would not be able to withdraw his claim for depreciation. It would appear that High Court proceeded on the basis that the revised return was not a valid return under Section 139(5) of the Act. High Court followed its earlier decision in Dasa Prakash Bottling Co. To us it appears that if the revised return is a valid return and the assessee has withdrawn the claim of depreciation it cannot be granted relying on the original return when the assessment is based on the revised return.40. We get support from the earlier decision of this Court in Dharampur Leather Co. Ltd. case [60 ITR 165] . Allowance of depreciation is calculated on the written down value of the assets, which written down value would be the actual cost of acquisition less the aggregate of all deductions "actually allowed" to the assessee for the past years. "Actually allowed" does not mean `notionally allowed. If the assessee has not claimed deduction of depreciation in any past year it cannot be said that it was nationally allowed to him. A thing is "allowed" when it is claimed. A subtle distinction is there when we examine the language used in Section 16 and that Sections 34 and 37 of the Act. It is rightly said that a privilege cannot be to a disadvantage and an option cannot become an obligation.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]21. It will be seen that the issues which were before the Court are not the same which we are now considering. In the case of Garden Silk Weaving Factory reliance was again placed on the earlier decision of this Court in Jaipuria China Clay Mines (P) Ltd.s case. The whole stress of argument of Mr. Verma was that net income has to be ascertained and for that purpose Income Tax Officer is duty bound to look into the amount of depreciation available for that assessment year and to allow credit for the same to arrive at the net income. This, he said, would be so irrespective whether the assessee has claimed depreciation or not and whether particulars of depreciation have been furnished or not. We do not think these two judgments of this Court on which strong reliance was placed by Mr. Verma advance his case. Issues in those cases were entirely different having no bearing on the question before us.We do not think Gujarat High Court in the case of Gujarat State Warehousing Corporation 104 ITR 1 has taken correct view in respect of the issues with which we are concerned in the present appeal. High Court has not properly appreciated the context in which this Court made observations in the case of Jaipuria China Clay Mines (P) Ltd., 59 ITR 555 on which High Court has relied. In later two cases of Chokshi Metel Refinery, 107 ITR 63 and Arun Textiles "C", 192 ITR 700 Gujarat High Court has itself taken, if we may say so, a different view falling in line with the views of Bombay, Punjab and Haryana, Karnataka, Andhra Pradesh, Calcutta and Kerala High Courts which view commends to us. Language of the provision of Sections 32 and 34 are specific and admits if no ambiguity. Section 32 allows depreciation as deduction subject to the provisions of Section 34. Section 34 provides that deduction under Section 32 shall be allowed only if prescribed particulars have been furnished. We have seen Rule 5AA of the Rules which though since deleted provided for the particulars required for the purpose of deduction under Section 32. Even in the absence of Rule 5AA return of the income in the form prescribed itself requires particulars to be furnished if the assessee claims depreciation. These particulars are required to be furnished in great detail. There is a circular of the Board dated August 31, 1965, which provides that depreciation could not be assessee and no claim for the depreciation has been made in the return.Officer in such a case is required to compute the income without allowing depreciation allowance. Circular of the Board dated April 11, 1955 is of no help to the Revenue. It imposes merely a duty on the officers of the department to assist thein every reasonable way, particularly, in the matter of claiming and securing relief. The Officer is required to do no more than to advise the assessee. It does not place any mandatory duty on the officer to allow depreciation if the assessee does not want to claim that. Provision for claim of depreciation is certainly for the benefit of the assessee. If it does not wish to avail that benefit for some reason, benefit cannot be forced upon him. It is for the assessee to see if the claim of depreciation is to his advantage. RatherOfficer should advise him not to claim depreciation if that course is beneficial to the assessee. That would be in our view the spirit of the circular dated April 11, 1955. Income under the head "profits and gains of business or profession" is chargeable tounder Section 28 and that income under Section 29 is to be computed in accordance with the provisions contained in sections 30 to 43A. The argument that since Section 32 provides for depreciation it has to be allowed in computing the income of the assessee cannot in all circumstances be accepted in view of the bar contained in Section 34. If Section 34 is not satisfied and particulars 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 in itself a complete code.38. In Ascharallal Ram Parkash case [90 ITR 477] Allahabad High Court said that since it is not mentioned in Section 34 as to in what form the prescribed particulars of depreciation must be furnished and that, therefore, there is no requirement in that Section that particulars must be furnished. High Court further went on to say that merely because the form of return provides for a place where the statement of such particulars should be set out would not mean that in absence of such statement theOfficer has no power to allow the depreciation. This is contrary to the mandate of SEction 34 as well as the Board circular dated August 31, 1965. Madras High Court in Dasa Parkash Bottling Co. case [122 ITR 9 ] following Allahabad High Court in the case of Ascharajlal Ram Prakash said thatOfficer can disallow the claim of depreciation if the assessee did not furnish the prescribed particulars. It further went on to hold that it would be open to theOfficer to grant depreciation even if the assessee had not furnished the prescribed particulars. In this case the assessee did not give the particulars relating to depreciation in the return form not did it claim depreciation. On being called upon by theOfficer to furnish necessary particulars the assessee in response thereto furnished the particulars under protest. On that basis theOfficer granted the depreciation. We do not think that the views expressed by the Madras High Court lay down correct law. 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 theOfficer under Section 29 to compute the income by allowing depreciation under Section 32. In the second Madras Case CIT v. Southern Petro Chemicals Industries Corporation Ltd., 233 ITR 400 the assessee did claim depreciation but he withdrew the same in the revised return. On that basis it was held that since the assessee had furnished the particulars regarding the claim of depreciation in the original return the assessee would not be able to withdraw his claim for depreciation. It would appear that High Court proceeded on the basis that the revised return was not a valid return under Section 139(5) of the Act. High Court followed its earlier decision in Dasa Prakash Bottling Co. To us it appears that if the revised return is a valid return and the assessee has withdrawn the claim of depreciation it cannot be granted relying on the original return when the assessment is based on the revised return.40. We get support from the earlier decision of this Court in Dharampur Leather Co. Ltd. case [60 ITR 165] . Allowance of depreciation is calculated on the written down value of the assets, which written down value would be the actual cost of acquisition less the aggregate of all deductions "actually allowed" to the assessee for the past years. "Actually allowed" does not mean `notionally allowed. If the assessee has not claimed deduction of depreciation in any past year it cannot be said that it was nationally allowed to him. A thing is "allowed" when it is claimed. A subtle distinction is there when we examine the language used in Section 16 and that Sections 34 and 37 of the Act. It is rightly said that a privilege cannot be to a disadvantage and an option cannot become an obligation.