2002 (10) TMI 68 - HC - Income Tax

Depreciation claim withdrawn in revised return for AY 1988-89: s.32(1) not mandatory; Revenue appeal dismissed.

Whether depreciation had to be allowed despite withdrawal of the claim in a revised return for AY 1988-89 was decided by applying the then-binding SC ... Claim for depreciation - Whether, Tribunal is correct in law in upholding the order of the Commissioner (Appeals) holding that the depreciation should not be allowed to the assessee since he has specifically withdrawn the claim for depreciation by filing revised return? - HELD THAT:- Though after that judgment was rendered by the apex court, Explanation 5 was inserted in section 32(1) of the Income-tax Act, 1961, by the Finance Act 2001, with effect from April 1, 2002, declaring that 'for the removal of doubts' the provisions of sub-section (1) will apply whether or not the assessee claims deduction in respect of depreciation in computing his total income, that Explanation cannot be regarded as taking away the effect of the judgment of the Supreme Court for the years prior to the date of introduction of the Explanation. The law declared by the Supreme Court cannot be regarded as having merely raised doubts. The interpretation of the relevant provisions of the Act by the apex court settles the law, and unless the subsequent amendment to the statute is expressly given retrospective effect, the law laid down by the apex court will remain the binding law for the period prior to the amendment. The newly added Explanation takes effect only on and from April 1, 2002, and will not be applicable for prior years. For the assessment year 1988-89, no depreciation was required to be allowed if the same had not been claimed. If a claim made in the original return had been given up in the revised return, there was no obligation to consider the claim for depreciation. The Tribunal was therefore right in upholding the order of the Commissioner who had held that the depreciation need not be allowed to the assessee as the assessee had specifically withdrawn the claim made earlier by filing a revised return. - The question is therefore answered against the Revenue. The High Court of Madras ruled that if an assessee withdraws a claim for depreciation in a revised return, the assessment based on that revised return is valid. The court cited a Supreme Court judgment and explained that a subsequent amendment to the Income-tax Act does not affect the earlier court ruling. Therefore, for the assessment year 1988-89, the assessee was not entitled to depreciation as it was withdrawn in the revised return. The Tribunal's decision upholding this was correct. The judgment favored the assessee and went against the Revenue.