Depreciation claim withdrawn in revised return for AY 1988-89: s.32(1) not mandatory; Revenue appeal dismissed.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 interpretation of s. 32(1) that depreciation was not mandatorily allowable unless claimed. Explanation 5 to s. 32(1), inserted w.e.f. 01.04.2002, was held prospective and not curative for prior years; absent express retrospectivity, it could not displace the SC-declared law for earlier AYs. Consequently, where the assessee withdrew depreciation in the revised return, the AO had no obligation to allow it, and the Tribunal correctly sustained the appellate order; the Revenue's appeal was dismissed.

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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 Therefore, for the assessment year 1988-89, the assessee was not entitled to depreciation as it was withdrawn in the revised return.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.

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