DCIT, NEW DELHI vs. M/S. ZF HERO CHASIS PVT. LTD., NEW DELHI

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ITA 3887/DEL/2016Status: DisposedITAT Delhi09 November 2017AY 2010-113 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that Explanation 5 to Section 32(1) mandates granting depreciation even if not claimed by the assessee. Therefore, the CIT(Appeals)'s decision to allow the depreciation claim was upheld.

What were the facts?

The Assessing Officer disallowed depreciation on goodwill claimed by the assessee, noting it was not claimed in the original return. The CIT(Appeals) allowed the claim, relying on Explanation 5 to Section 32(1) of the Income Tax Act.

What were the issues?

Whether depreciation on goodwill is allowable even if not claimed in the return of income, considering Explanation 5 to Section 32(1).

Which sections of the Income-tax Act were involved?

Section 32(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES: ‘G’, NEW DELHI

For Appellant: Shri Kaushlendra Tiwari, Sr.D.R

PER NK SAINI, ACCOUNTANT MEMBER

1.

This is an appeal filed by the Department against the Order dt. 27.04.2016 of Ld.CIT(Appeals)-22, New Delhi.

1.1. The only effective ground raised in this appeal relates to the depreciation on goodwill which reads as under.

On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred deleting the addition of Rs.10,29,60,726/- on account of disallowance of depreciation on good will by relying on the decision of Hon’ble Supreme Court in the case of M/s Goetze (India) Ltd. as the same has not been claimed in the return of income.

2.

Facts in brief are that the assessee filed return of income on 15.10.2010 declaring loss of Rs.68,11,661/- which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act). Later on the case was selected for scrutiny. The Assessing Officer (A.O.) during the course of assessment proceedings noticed that the assessee had claimed depreciation on good will of Rs.10,29,60,726/- but the same had not been claimed in the return of income. He did not allow the claim of the assessee. Being aggrieved the assessee carried the matter to the Ld.CIT(A) who allowed the claim of the assessee by observing in para 5.3 of the impugned order as under.

5.3. The contentions of the appellant and the A.O. has been examined. The issue whether the A.O. could have entertained the claim of depreciation after the expiry of time limit for filing of revised return u/s 139(5) is irrelevant in this case as explanation 5 to Sec.32(1) makes it mandatory for the A.O. to grant depreciation irrespective of whether an assessee had claimed the same or not. When explanation 5 is read with the decision of the Apex Court in the case of Smifs Securities Ltd., the A.O. was under statutory obligation to grant depreciation. Therefore, the addition made is deleted.

3.

Now the Department is in appeal. The Ld.Sr.D.R. strongly supported the order of the A.O. and the Ld.Counsel for the assessee strongly supported the impugned order passed by the Ld.CIT(Appeals).

4.

We have considered the submissions of both the parties and perused material available on record. In the present case it is noticed that the Ld.CIT(A) allowed the claim of the assessee by keeping in view the provisions contained in Explanation 5 to S.32(1) of the Act which read as under.

Explanation 5 to Sec.32(1) of the Income Tax Act, 1961 “Explanation 5: For the removal of doubts, it is hereby declared that the provisions of this sub section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income.”

5.

On perusal of the above provision it is clear that even if the assessee had not claimed any deduction in respect of depreciation in computing the total income, the deduction is allowable as per the provisions of S.32(1) of the Act. We, therefore, do not see any valid ground to interfere with the findings given by the Ld.CIT(Appeals). Hence, the departmental appeal is dismissed.

6.

In the result the departmental appeal is dismissed. Pronounced in the Open Court on 09th November, 2017.

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