Law: Income Tax Act, 1961

Section: 32,35(1),2(iv)

(a) Income-tax----Depreciation---Scientific research---Allowances on capital expenditure--¬Basically are of same nature though differing in rationale---Double allowance on same assets not intended---No new levy---"In respect of the same previous year"---Meaning of---Indian Income Tax Act, 1922, S.10(2)(vi), (xiv)---Indian Income Tax Act, 1961, Ss.32, 35(1), 2(iv), Expln. 43(1) (before and after amendment in 1980)---Constitution of India, Arts. 14 & 19(1)(g). The amendment effected by the Finance (No.2) Act, 1980, with retrospective effect from April 1, 1962, to section 35(2)(iv) of the Income Tax Act, 1961 to the effect that, where a deduction is allowed under section 35, no depreciation shall be allowed for the same "or any other previous year" in respect of that asset, does not impose a new levy or take away any existing right but is merely clarificatory and is valid. It is neither unreasonable nor oppressive and does not offend the fundamental rights of the assessees under Articles 14 and 19(i)(g) of the Constitution of India. Where a capital asset used for scientific research related to the business of the assessee is also ipso facto an asset used for the purpose of the business, it is impossible to conceive of the Legislature having envisaged a double deduction in respect of the same expenditure, one by way of depreciation under section 32 of the Income Tax Act, 1961, and the other by way of allowance under section 35(1)(iv) of a part of the capital expenditure on scientific research, even though the two heads of deduction do not completely overlap and there is some difference in the rationale of the two deductions. Under the provisions of the Act as they stood prior to the 1980 Amendment, the assessee could not have claimed continued grant of depreciation after the expiry of the period of five years before the 1968 Amendment and after the expiry of the first year after the 1968 Amendment during which period the entire cost of the capital asset has been allowed to be set off completely by way of allowance under section 35(1)(iv) against the business profits of those five years or the one previous year as the case may be. There is a fundamental, though…

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