Depreciation not retroactive: Court rules in favor of assessee

The High Court of Karnataka upheld the appellate authority's decision to withdraw depreciation claimed by the assessee. The court determined that the amendment to Section 32 of the Act, allowing depreciation even if not initially claimed, was prospective and did not apply to the relevant assessment year. As the assessee did not claim depreciation initially, the court ruled in their favor, dismissing the Revenue's appeal.

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Issues Involved:
Interpretation of Section 32 of the Act regarding depreciation claim.

Analysis:
The High Court of Karnataka heard an appeal by the Revenue against a Tribunal order upholding the appellate authority's direction to withdraw depreciation. The substantial question of law considered was whether depreciation could be allowed when not claimed by the assessee, in light of Section 32 of the Act. The assessee did not claim depreciation initially, but the Assessing Authority granted it based on an amendment to Section 32(1) introduced in 2002. The assessee argued that the amendment was prospective and did not apply to the assessment year 1998-99. The appellate authority accepted this argument, leading to the deletion of depreciation. The Tribunal, in line with a previous judgment regarding the prospective nature of the amendment, dismissed the Revenue's appeal.

The High Court cited a previous case where it was established that the amendment to Section 32 was indeed prospective. Consequently, the order of the appellate authority was deemed appropriate, and no grounds for interference were found. The substantial question of law was answered in favor of the assessee, resulting in the dismissal of the appeal by the Revenue.

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