Law: Income Tax Act, 1961

Section: 32

Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance of (General) - Assessment year 2005-06 - Whether where assessee-company claimed depreciation on buildings, plant and machinery etc. describing it as 'Terminal depreciation' same could not be disallowed on ground that there is no provision in Act to allow 'terminal depreciation' - Held, yes [Paras 5 and 6] [In favour of assessee] FACTS â–  For the assessment year 2005-06, the assessee-company had claimed depreciation on building, plant and machinery describing as 'terminal depreciation'. â–  The Assessing Officer was of the view that the expression 'terminal depreciation' was wrong as there is no provision under the Act to allow terminal depreciation. He, therefore, disallowed the deduction claimed by the assessee. â–  On appeal, the Commissioner (Appeals) as also the Tribunal were of the view that the depreciation claimed by the assessee during the previous year though described as terminal depreciation could not be disallowed and there was no case for reopening the assessment. â–  On appeal by the revenue: HELD â–  The term 'depreciation' as ordinarily understood in the context of the Act has been considered by the Supreme Court in the case of I.C.D.S. Ltd. v. CIT [2013] 350 ITR 527/212 Taxman 550/29 taxmann.com 129, the Hon'ble Supreme Court was concerned with the interpretation of section 32. Applying the said interpretation of section 32, in the instant case there is no manner of doubt that the assessee had in fact claimed depreciation as contemplated under section 32 merely because it was termed as 'Terminal depreciation' was no reason to disallow the claim. [Para 5] â–  The Tribunal has relied, correctly, upon the decision of the Supreme Court in the case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312, which held that the concept of change of opinion should be used as a test to check any abuse of power by the Assessing Officer. It is viewed that the test is correctly applied in the instant case and there was no occasion for the Assessing Officer to reopen the assessment without any tangible material which formed a live link to the…

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