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2008] 304 ITR 106 [2009] 177 TAXMAN 266 (GUJ.) HIGH COURT OF GUJARAT Commissioner of Income-tax v. Crown Products* D.A. MEHTA AND Z.K. SAIYED, JJ. ITR NO. 39 OF 1999 MAY 12, 2008 Section 32 of the Income-tax Act, 1961, read with rule 5 of the Income-tax Rules, 1962 - Depreciation - Allowance/Rate of - Assessment year 1988-89 - Whether once an assessee is entitled to vary previous year in terms of section 3(4) and larger income from business or profession stands included in total income of extended previous year and is brought to tax, corresponding depreciation for extended period cannot be denied - Held, yes FACTS In the assessment year 1988-89, the assessee-firm claimed depreciation for a period of seventeen months. The Assessing Officer held that higher depreciation on proportionate basis was allowable for the assessment year 1989-90 only and, hence, its depreciation claim would be allowed after revision. On appeal, the Commissioner (Appeals) allowed the claim of depreciation. On the revenue's appeal to the Tribunal, it upheld the view expressed by the Commissioner (Appeals). On the revenue's appeal to the High Court : HELD Section 32 deals with depreciation in respect of the assets mentioned therein which are used by the assessee for the purpose of business or profession. The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from 1-4-1988, have substituted clause (ii ) of sub-section (1) of section 32 and the concept of block of assets was introduced. The position in law, therefore, is that for and from the assessment year 1988-89, instead of granting depreciation on each individual asset at the prescribed rate, depreciation is required to be granted on the block of assets at the prescribed rate. Rule 5 of the Rules was substituted with effect from 2-4-1987 by the Income-tax (Third Amendment) Rules, 1987, whereunder the existing proviso stood deleted. [Para 8] On a plain reading of the said proviso, it is apparent that in a case where the assessee has been allowed to vary the meaning of the expression 'previous year' in the light of section 3(4) and income of such an assessee for a period of thirteen months or more is included in…

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