Assessee's Choice: Depreciation Not Claimed Equals No Allowance

The appeal was allowed in favor of the assessee, granting relief. The Tribunal held that the assessee can choose not to claim depreciation allowance when computing deduction under section 80-IA of the Income-tax Act, 1961, if the depreciation is not claimed in the books of account. The decisions in cases favoring the revenue were deemed per incuriam, and the Tribunal was bound to follow the decision supporting the assessee's position. Therefore, the Assessing Officer cannot impose depreciation allowance for section 80-IA computation in such circumstances.

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Issues Involved:
1. Whether the assessee has the option to claim depreciation allowance while computing deduction under section 80-IA of the Income-tax Act, 1961, when the depreciation is not claimed in the books of account.

Issue-wise Detailed Analysis:

1. Option to Claim Depreciation Allowance:

The core issue in this appeal is whether the assessee can opt not to claim depreciation allowance while computing deduction under section 80-IA of the Income-tax Act, 1961, if the depreciation is not claimed in the books of account.

Tribunal's Decision in Plastiblends India Ltd. Case:
The Tribunal's decision in the case of Plastiblends India Ltd. v. ITO [ITA No. 4542 (Mum.) of 1999, dated 10-2-2004] supports the assessee's stance. The Tribunal had concluded that depreciation not claimed in the books of account should not be thrust upon the assessee for computing the deduction under section 80-IA.

Departmental Representative's Contention:
The Departmental Representative argued for the revenue, citing subsequent Tribunal decisions in Prince SWR Systems (P.) Ltd. v. Dy. CIT [IT Appeal No. 2811 (Mum.) of 2004, dated 10-9-2004] and ITO v. Venus Jewels [IT Appeal No. 3842 (Mum.) of 2001, dated 25-10-2004], which favored the revenue.

Analysis of Prince SWR Systems (P.) Ltd. Case:
The Tribunal in Prince SWR Systems (P.) Ltd. did not follow the co-ordinate bench decision in Plastiblends India Ltd. and decided against the assessee, relying on the Bombay High Court judgment in Indian Rayon Corpn. Ltd. v. CIT [2003] 261 ITR 98. However, the Plastiblends India Ltd. case had already considered the Indian Rayon Corpn. Ltd. decision and concluded it was not relevant to the issue. According to the Supreme Court's ruling in Union of India v. Paras Laminates (P.) Ltd. [1990] 186 ITR 722, a co-ordinate bench cannot disregard another co-ordinate bench's decision on an identical issue. Thus, the decision in Prince SWR Systems (P.) Ltd. is deemed per incuriam.

Analysis of Venus Jewels Case:
Similarly, the Tribunal in Venus Jewels favored the revenue based on the Indian Rayon Corpn. Ltd. judgment and the Rajasthan High Court's decision in Vijay Industries v. CIT [2004] 139 Taxman 353. However, Plastiblends India Ltd. had already considered these judgments and concluded that depreciation not claimed in the books should not be imposed for section 80-IA computation. Following the Supreme Court's judgment in Paras Laminates (P.) Ltd., the decision in Venus Jewels is also per incuriam.

Binding Effect of Per Incuriam Decisions:
The Andhra Pradesh High Court in CIT v. B.R. Constructions [2003] 202 ITR 2221 (FB) emphasized that a per incuriam decision is not a binding precedent. The principle of stare decisis mandates that a court follows the decisions of higher or co-ordinate benches to ensure consistency and predictability in the law.

Conclusion:
Given that the decisions in Prince SWR Systems (P.) Ltd. and Venus Jewels are per incuriam, they do not hold binding precedent value. The Tribunal is bound to follow the decision in Plastiblends India Ltd., which supports the assessee's position. Therefore, it is not permissible for the Assessing Officer to impose depreciation allowance when computing deduction under section 80-IA if the depreciation is not claimed in the books of account.

Judgment:
The appeal is allowed, and the assessee is granted relief accordingly.

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