Depreciation not claimed by assessee could not be forced into Chapter VI-A deduction computation before Explanation 5

Depreciation was not compulsory where the assessee had not claimed it, and before insertion of Explanation 5 to section 32(1) the Assessing Officer could not thrust it upon the assessee while computing deduction under Chapter VI-A. The Court followed its earlier decision, held that there was no reason to depart from that view, and answered the reference in favour of the assessee. The Tribunal was therefore wrong in law in treating unclaimed depreciation as mandatorily allowable for the computation.

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Issues: Whether depreciation, though not claimed by the assessee, could be thrust upon it for the purpose of computing deduction under Chapter VI-A before insertion of Explanation 5 to section 32(1) of the Income-tax Act, 1961.

Analysis: The dispute was held to be covered by the Court's earlier decision in favour of the assessee. The governing principle applied was that depreciation is not mandatory in every case and, where the assessee does not claim it, the Assessing Officer cannot compel its allowance while computing the relevant income. The Court found no reason to depart from the earlier view and answered the reference accordingly.

Conclusion: The Tribunal was not right in law in holding that depreciation, whether claimed or not, had to be foisted upon the assessee prior to insertion of Explanation 5 to section 32(1) while calculating deduction under Chapter VI-A. The issue was decided in favour of the assessee.

Final Conclusion: The appeals succeeded and the assessee obtained relief on the only substantive question decided.

Ratio Decidendi: Depreciation under the Income-tax Act, 1961 is not compulsory where the assessee has not claimed it, and it cannot be imposed by the Assessing Officer for computing deductions unless the statute clearly so requires.

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