Case: G.K. Choksi and Company Vs. Commissioner of Income Tax, Gujarat

The assessee (hereinafter referred to as "the appellant") is a firm of Chartered Accountants in Ahmedabad. The Assessment relates to the Year 1984-85 for the financial year ending on 31.03.1984. During the relevant year the appellant constructed a building for the purpose of residence for its low paid employees and claimed initial depreciation @ 40% under Section 32(1)(iv) of the Act amounting to Rs.43,505/- on the actual cost of the building i.e. Rs.1,08,757/-. The Income Tax Officer (ITO) vide its order dated 15.1.1985 rejected the claim of the assessee-appellant on the ground that the said provision is applicable to an assessee carrying on "business" and the same is not available to aCommissioner of Income Tax (Appeals) [for short CIT (A)] by its order dated 30.4.1985 reversed the order of the Income Tax Officer relying upon the judgment of this Court in Barendra Prasad Ray V. Income Tax Officer, 1981 (2) SCC 693 , and allowed the claim of the appellant with the further direction to the Income Tax Officer to grant initial depreciation @ 40% for the building erected by the appellant for the residential purposes of its employees.Being aggrieved by the order passed by the CIT(A), Revenue filed an appeal before the Income Tax Appellate Tribunal (for short "the Tribunal"). The Tribunal reversed the order passed by the CIT (A) and restored the order passed by the ITO. It was held that the appellant was not entitled to the relief claimed. That the judgment in Barendra Prasad Ray (supra) was not applicable to the facts and circumstances of the present case. That, Barendra Prasad Ray (supra) was decided by this Court in peculiar facts and circumstances prevailing in that case and the same was restricted to the facts prevalent therein. It was also observed that in the said case, this Court was dealing with another provision, i.e., Section 9 of the Act and the observations made therein could not be applied to the facts of the present case. The Tribunal also noted the difference between the provisions of Section 32(1) and Section 32(1)(iv) of theby the order passed by the Tribunal, the appellant filed a Reference Application under Section 256(1) of the Act before the Tribunal to refer certain questions of law to the jurisdictional High Court for its opinion. The Tribunal referred the following question of law to the jurisdictional High Court for itson the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was not entitled to deduction under Section 32(1)(iv) of theHigh Court by its impugned judgment has confirmed the order passed by the Tribunal and held that the appellant is not entitled to the deduction claimed by it under Section 32(1)(iv) of the Act on the ground that it was a firm of professionals, who do not come within the purview of Section 32(1)(iv) of the Act.

Reasoning: 12. We do not find much substance in the submissions advanced by the learned counsel for the appellant. Section 32(1) of the Act does not help the appellant in any way to construe the word "business" appearing in32(1)(iv) to include "profession" as well. The legislature intended to have different scope for business and profession in Section 32(1). If the legislature had intended to include "profession" in the word "business", then there was no need to mention two different words, i.e., "business" or "profession" in Section 32(1) of the Act.13. Section 32(1) stipulates that on buildings, machinery, plant or furniture which is owned by an assessee and used for the purposes of "business or profession", depreciation shall be available by way of deduction. Section 32(1) uses the phrase "the following deductions shall", therefore it is apparent that the saidis laying down general conditions or basic requirements, on fulfillment of which, an assessee shall become eligible for deductions as provided in the various clauses which follow. The learned counsel appearing for the Revenue has rightly contended that from the Scheme of the Section it is discernible that various clauses shall operate on further specific conditions laid down in each individual clause. Clause (i) deals with case of ships other than ships ordinarily plying on inland waters, clause (ii) pertains to buildings, machinery, plant or furniture, other than ships and is applicable to both business and profession in regard to the claim for depreciation in respect of the building , machinery, plant or furniture. In clause (iv) the legislature has used the word "business" only. It means that the legislature was conscious of the fact that the business and profession are different and separate and they cannot be used interchangeably. It is a pointer to the fact that the Legislature under clause (iv) intended to restrict the benefit to the assessees carrying on business only. In(ii) the legislature has specifically extended the benefit of depreciation to the assessees carrying on "business" as well as "profession" whereas in(iv), the legislature has restricted the benefit to the asseessees carrying on "business" only.We agree with the submission made by the counsel for the appellant that in view of the settled law, if two interpretations are possible, then the one in favour of the assessee should be adopted. But, we are of the view that in the present case two interpretations are not possible as the word "business" occurring in clause (iv) of Section 32(1), by no stretch of imagination, can be said to include "profession" as well. If the expression "business" is interpreted as including within its scope "profession", it would not mean that the lacuna has been made good by giving a wider interpretation to the word business. There is nothing in Section 32(1)(iv) which envisages the scope of word "business" to include in it "profession" as well. If the expression "business" is interpreted to include within its scope "profession" as well, it would be doing violence to the provisions of the Act. Such interpretation would amount to first creating an imaginative lacuna and then filling it up, which is not permissible in law. The contention of the counsel for the appellant that Section 32(1)(iv) should be given purposive interpretation to include "profession", has thus to be rejected.