COMMISSIONER OF INCOME TAX Vs. ARUN TEXTILE C

JUDGEMENT

(1.) THE assessee -firm in the original return of income for the assessment year 1973 -74 filed on June 14, 1973, had claimed depreciation on machinery of Rs. 53,057. In its revised return filed on March 13, 1975, the said claim of depreciation was withdrawn. The Income -tax Officer had, under an assessment order made under section 143(3) of the Income -tax Act, 1961, while noticing that in the revised return of income the assessee had not claimed depreciation, allowed the depreciation which was claimed in the original return on the ground that it was not necessary for allowing the depreciation that the factory should work full -fledged and further that the assessee had provided for the depreciation in the account books. The assessee challenged this order in appeal on the ground that it was open to the assessee not to claim the deduction and since the deduction was not claimed in the revised return, there was no occasion for the Income -tax Officer to allow the same. The Appellate Assistant Commissioner, adopting the reasons contained in the decision of the Allahabad High Court in Ascharajlal Ram Prakash v. CIT : [1973]90ITR477(All) , to the effect that depreciation was a statutory charge and the correct profit cannot be computed without allowing depreciation, upheld the order of the Income -tax Officer in allowing depreciation to the assessee. The assessee challenged the said order before the Income -tax Appellate Tribunal which held that there were two courses open to the assessee, one, of claiming depreciation allowance in which event it would be charged tax on a higher amount of balancing charge and, two, of forgoing the claim for depreciation, the result of which would be that the tax payable on the balancing charge would be less. The Tribunal found that it was open to the assessee to pursue the course which leaves it with a lighter burden particularly when there was no effect on the profits and gains which were required to be determined for the year under reference. The Tribunal found that it was open to the assessee to reduce the incidence of tax by forgoing the claim for deduction though, in law, it may be entitled to the same. The Tribunal, therefore, accepted the assessee's contentions as regards the withdrawal of the claim for depreciation allowance and partly allowed the appeal.

(2.) IN the above background, the Tribunal has referred to us the following two questions under section 256(1) of the Income -tax Act, 1961 (hereinafter referred to as 'the said Act')

(3.) IT was contended by learned counsel, Mr. B. J. Shelat, on behalf of the Revenue that, having regard to the scheme of the Act more particularly to the provisions of sections 28, 29, 32 and 34, it was clear that there was a statutory duty cast on the Income -tax Officer to arrive at the real income of the assessee and, for that purpose, it was essential for him to adopt the method prescribed for computing the income. He submitted that, as provided in section 29 of the said Act, the income referred to in section 28 was to be computed in accordance with the provisions contained in sections 30 to 43 of the said Act. He submitted that section 32 provided for depreciation in respect of the items mentioned therein which were owned by the assessee and used for the purpose of business or profession and that the Income -tax officer was bound to allow the deductions mentioned therein subject to the provisions of section 34 of the Act. He submitted that the use of the word 'shall' in section 32(1) clearly indicated that the provision was mandatory in nature and that the Income -tax Officer was bound to allow the dedications listed therein, whether claimed or not. In support of his arguments, he also referred to the provisions of section 143(1)(b)(ii) of the said Act as were applicable at the relevant time pointing out that, in making an ex parts assessment under section 143(1)(a), the Income -tax Officer was empowered to allow any dedication which may not have been claimed in the return. Mr. Shelat also argued that, even if the prescribed particulars were not furnished in connection with the depreciation under section 32, the Income -tax Officer had not only jurisdiction but was duty bound to allows the deductions under the said provision for arriving at the real income of the assessee. Learned counsel, Mr. Mehta, appearing for the assessee, on the other hand, submitted that the Income -tax Officer cannot impose a deduction when no claim is made. He submitted that it was open to the assessee to revise his return by withdrawing the claim for depreciation and, once the return was revised, the Income -tax Officer could not have allowed the depreciation on the basis that, in the original return, the claim for depreciation was made by the assessee.