Law:

Section:

Section 32(1) of the income-tax act, 1961-Depreciation-Allowance of-Whether where assessee has not claimed depreciation and has not furnished prescribed particulars, it is nevertheless statutorily binding on ITO to compute and allow depreciation-Held, no Section 80J, read with section 80A(2), of the income-tax act, 1961-Deductions-Profits and gains from newly established industrial undertakings-Though assessee did not claim depreciation, ITO suo moto allowed depreciation resulting in loss and, consequently, ITO also disallowed assessee's claim for deduction under section 80J-If depreciation was not allowed, assessee' would have had book profit-Whether ITO was not justified in allowing depreciation and hence assessee was entitled to deduction under section 80J notwithstanding provisions of section 80A (2)-Held, on facts, yes Facts Though in the original returns of income for the relevant assessment years, the assessee-company claimed deduction of depreciation allowance, it filed revised returns foregoing the said claim. It urged before the ITO that it was the sweet will of a taxpayer either to claim or disclaim depreciation allowance and there was no statutory sanction behind such claim being enforced on the assessee. The ITO opined that it was statutorily binding on him to compute the total income which must take into consideration deductions of depreciation allowance. Consequently, he made the assessments giving deductions on account of the depreciation allowance. On appeal, the AAC and, on further appeal, the Tribunal upheld the order of the ITO. The ITO also disallowed relief under section 80J to the assessee on the ground that there was a loss. On appeal, the assessee contended that if depreciation was excluded, there was a book profit to it and, as such, it was entitled to the benefit of section 80J. The AAC, accepting the assessee's contention, directed the ITO to consider the claim of the assessee under section 80J. On further appeal, the Tribunal held that the AAC could not give directions to the ITO to compute allowance under section 80J in view of the prohibition contained in section 80A(2). It also held that rule 19A was not in conflict with section…

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