|COURT:||Gujarat High Court|
|CORAM:||K. J. Thaker J, K. S. Jhaveri J|
|SECTION(S):||32, 80-IA, 80HHC|
|COUNSEL:||S. N. Soparkar|
|DATE:||December 17, 2014 (Date of pronouncement)|
|DATE:||January 10, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 80-IA/ 80HHC: Despite the introduction of 'block of assets' depreciation cannot be thrust on the assessee while computing quantum of eligible deduction|
The High Court had to be consider whether for computing the profits eligible for deduction u/s 80HHC and 80-IA, depreciation (under the concept of ‘block of assets’) had to be deducted even though the assessee had not claimed the same. The department relied on the judgement of the Full Bench of the Bombay High Court in Plastiblends India Limited vs. ACIT 318 ITR (Bom) (FB) where it was held that for the purposes of deduction under Chapter VIA, the gross total income has to be computed inter alia by deducting the deductions allowable under sections 30 to 43D of the Act, including depreciation allowable under section 32 of the Act, even though the assessee has computed the total income under Chapter IV by disclaiming the current depreciation. HELD by the Gujarat High Court taking a different view:
Depreciation is optional to the assessee and once he chooses not to claim it, the Assessing Officer cannot allow it while computing the income. Further, once depreciation is optional, it will be optional for block of assets also. It is not necessary that the depreciation is allowable or not allowable as a whole. The assessee can claim it partly also in respect of certain block of assets and not claim in respect of other block of assets. Accordingly, for purposes of sections 80HHC and 80-IA, depreciation not claimed for by the assessee cannot be allowed as a deduction despite the introduction of the concept of block of assets.
What is the concept of Depreciation? It is an invisible revenue expenditure by way of wear and tear of the Fixed Assets used in the business in the course of carrying on of the business. This invisible expenditure incurred is wholly necessary and exclusively for the purpose of business. When Depreciation of the Fixed Assets which are used in one’s business is essential and integral part of carrying on the business. Therefore excluding the amount of Depreciation Allowance as allowable under the I.T.Act does not give a fair and correct picture of the profit or loss incurred during the year. With due respect to the Judicial Authority, not considering the Depreciation allowance allowable in a particular year presents a lopsided picture of the profitability. In that view of the matter, in the later years claim of highly inflated amount of depreciation has to be considered for allowance in spite of the fact that actual depreciated value of the fixed assets would be much lower than the written down value on which the depreciation would be allowable. Considering all the aforesaid aspects, excluding the depreciation allowance as deductible expenditure with the object of manipulating the profitability ignoring the accounting principles in the guise of tax planning should not be encouraged.