2001 (8) TMI 103 - HC - Income Tax

Deduction denial for accountants' building construction under Income-tax Act

GK. Choksi And Co. Versus Commissioner of Income Tax.

The Tribunal held that the assessee, a firm of chartered accountants, was not entitled to deduction under section 32(1)(iv) of the Income-tax Act, 1961, ... Depreciation, Initial Depreciation Issues Involved:1. Entitlement to deduction under section 32(1)(iv) of the Income-tax Act, 1961.2. Interpretation of the terms 'business' and 'profession' within the context of section 32(1)(iv).3. Legislative intent behind the specific use of terms in the Income-tax Act.4. Application of judicial precedents and statutory interpretation principles.Issue-wise Detailed Analysis:1. Entitlement to Deduction under Section 32(1)(iv):The primary issue was whether the assessee, a firm of chartered accountants, was entitled to initial depreciation under section 32(1)(iv) of the Income-tax Act, 1961, for a building erected during the financial year ending March 31, 1984. The Income-tax Officer denied the claim, stating that the provision applied only to businesses, not professions. The Commissioner of Income-tax (Appeals) accepted the claim, relying on the Supreme Court decision in Barendra Prasad Ray v. ITO. However, the Tribunal reversed this, concluding that the Supreme Court decision was not universally applicable and that the legislative intent was to restrict the deduction to businesses only.2. Interpretation of 'Business' and 'Profession':The Tribunal noted the difference between the provisions of section 32(1) and section 32(1)(iv), emphasizing that the Legislature specifically mentioned 'business' in section 32(1)(iv) and omitted 'profession.' The assessee argued that the opening portion of section 32(1) used 'business or profession,' and hence, clause (iv) should be governed by this opening portion. However, the Tribunal held that the terms 'business' and 'profession' should be given their independent meanings, as provided in the statute.3. Legislative Intent:The Tribunal observed that the legislative intent, as reflected in the statute, was clear in distinguishing between 'business' and 'profession.' Various clauses in section 32 specify their applicability to either 'business' or 'profession' or both. For instance, clauses (i) to (iii) do not specify their applicability, implying they apply to both, while clause (iv) specifically uses 'business.' The Tribunal also referred to Circular No. 202, which used the term 'taxpayer,' indicating that the legislative intent was to include both business and profession, but this did not override the specific language of the statute.4. Judicial Precedents and Statutory Interpretation:The Tribunal considered the Supreme Court decision in Barendra Prasad Ray, which dealt with the term 'business connection' under section 9 of the Act. The Tribunal held that this decision was based on specific facts and did not apply universally. The Tribunal also referred to other judicial precedents, such as CIT v. Lallubhai Nagardas and Sons and Modipon Ltd. v. CIT, which emphasized strict interpretation of taxing statutes. The Tribunal concluded that the plain and literal interpretation of section 32(1)(iv) did not include 'profession' within 'business,' and any other interpretation would be contrary to the legislative intent.Conclusion:The Tribunal held that the assessee was not entitled to deduction under section 32(1)(iv) of the Act. The question referred was answered in the affirmative, in favor of the Revenue and against the assessee, with no order as to costs. The Tribunal emphasized that the legislative classification of 'business' and 'profession' was rational and did not result in unjust discrimination. The Tribunal also noted that it was not open to the court to add words to the statute to achieve a presumed legislative object.