Retrospective bar on depreciation after section 35(2) deduction prevents a second tax benefit for the same asset.

A retrospective amendment to section 35(2)(iv) of the Income-tax Act bars depreciation under section 32 where a deduction has already been allowed for expenditure represented wholly or partly by the same asset. The court rejected the earlier view that the restriction applied only to the same year, holding that the amended provision governed the assessment year in question. Accordingly, depreciation was not allowable on assets for which deduction had been granted under section 35(2), and the reference was decided against the assessee.

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Issues: Whether depreciation under section 32 of the Income-tax Act, 1961 is allowable in respect of assets for which deduction had earlier been granted under section 35(2) of the Income-tax Act, 1961.

Analysis: Section 35(2)(iv) of the Income-tax Act, 1961, inserted by the Finance (No. 2) Act, 1980 with retrospective effect from 1 April 1962, provides that where a deduction is allowed in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under section 32 of the Income-tax Act, 1961 for the same or other previous years in respect of that asset. The earlier view that the restriction operated only for the same year could not survive the retrospective amendment, which applied to the assessment year in question.

Conclusion: The assessee is not entitled to depreciation under section 32 of the Income-tax Act, 1961 in respect of the assets for which deduction had been allowed under section 35(2) of the Income-tax Act, 1961; the question was answered in the negative and in favour of the Revenue.

Final Conclusion: The reference was decided against the assessee, and the statutory bar created by the retrospective amendment governed the assessment year involved.

Ratio Decidendi: A retrospective amendment expressly prohibiting depreciation under section 32 once a deduction has been allowed under section 35(2) for the same asset disentitles the assessee from claiming such depreciation for the relevant year and earlier or later years as covered by the provision.

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