M/S. HIMSON TEXTILE ENGINEERING INDUSTRIES LIMITED vs. ASST. COMMISSIONER OF INCOME TAX OFFICER.

Facts

The assessee, Sakun Polymers Ltd., filed its return for Assessment Year 1996-97 declaring a total income of Rs. 43,49,320/-. The Assessing Officer passed an order under Section 143(3) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal. The revenue filed an appeal before the Income Tax Appellate Tribunal (ITAT), which partly allowed the revenue's appeal. The assessee then filed these appeals before the High Court challenging the ITAT's orders. The appeals pertain to different assessment years and ITAT appeal numbers, with the facts being similar across them.

Held

The High Court held that the issue raised in these appeals is already concluded in favour of the assessee and against the revenue. The Court referred to its own decision in Tax Appeal No. 93 of 2000 (Dy. CIT(Asst) vs. Sun Pharmaceuticals Ind. Ltd) and other related judgments. The Court found that the Bombay High Court's decision in Plastiblends India Limited v. Additional Commissioner of Income-tax & Ors. could not be applied to the facts of this case. The Court agreed with the reasoning of the Gujarat High Court in CIT v. Arun Textiles, which held that depreciation is optional for the assessee and if not claimed, the Assessing Officer cannot allow it. The Court also noted that the Circular of CBDT 29 D (XIX-4) of 1965 directed that if particulars are not furnished and no claim for depreciation is made, the Income-Tax Officer should estimate income without allowing depreciation. Therefore, the Tribunal was not right in holding that depreciation, whether claimed or not, has to be foisted upon the assessee. The appeals were allowed, and the question of law was answered in favour of the assessee.

Key Issues

1. Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that depreciation, whether claimed or not, has to be foisted upon the assessee even prior to the insertion of Explanation 5 to Section 32(1) of the Act with effect from 01/04/2002, while calculating deduction under Chapter VI-A of the Act? (Question of law) 2. Whether on the facts the Tribunal is right in law in interpreting Section 80IA and the explanation inserted with effect from 01.04.2002 to section 32 of the Income Tax Act, 1961 for the purpose of deduction under Chapter VIA of the Income Tax Act, 1961? (Question of law) Assessee's contention: The question of law involved in these appeals is already concluded by this Court in favour of the assessee in Tax Appeal No.93 of 2000 [Dy. CIT(Asst) vs. Sun Pharmaceuticals Ind. Ltd]. The Tribunal was not right in holding that depreciation, whether claimed or not, has to be foisted upon the assessee. The Gujarat High Court in CIT v. Arun Textiles held that depreciation is optional and the Assessing Officer cannot allow it if not claimed. Revenue's contention: The question of law as raised in this case was never decided in the previously cited matters, and therefore, requested that the question of law be decided afresh. Relied on the decision of the Full Bench of the Bombay High Court in Plastiblends India Limited v. Additional Commissioner of Income-tax & Ors.