Court allows depreciation not claimed in normal income computation for Chapter VI A deductions

The Court ruled in favor of the assessee, holding that depreciation not claimed in the return for normal computation of income must be allowed while computing deductions under Chapter VI A of an industrial undertaking. The Court found that once the assessee chooses not to claim depreciation, the Assessing Officer cannot allow it while computing income. The decision was based on a Division Bench judgment and the lack of distinguishing features presented by the Revenue. Consequently, the appeals were disposed of in favor of the assessee.

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Issues involved:
1. Whether depreciation not claimed in the return for normal computation of income has to be allowed while computing deductions under Chapter VI A of an industrial undertakingRs.
2. Whether the effect on the Written Down Value of assets due to non-claiming of depreciation in normal computation of income should be allowed as a deduction while computing income for Chapter VI ARs.

Analysis:
1. The case involved Tax Appeals under Section 260A of the Income Tax Act, 1961 against a common order passed by the Income Tax Appellate Tribunal. The substantial questions of law raised revolved around the allowance of depreciation not claimed in the return for normal computation of income while computing deductions under Chapter VI A of an industrial undertaking.
2. The assessee, a private limited company engaged in manufacturing, had filed its return of income declaring 'NIL' income after claiming deductions under section 80IA. The assessment disallowed the claim under section 80IA, leading to appeals before the CIT(A) and subsequently before the Tribunal, which were dismissed.
3. The controversy was argued based on a Division Bench judgment of the Court in a similar case, where it was held that depreciation is optional for the assessee. Once the assessee chooses not to claim it, the Assessing Officer cannot allow it while computing income. The Revenue failed to provide any distinguishing feature to warrant a different view.
4. Ultimately, the Court ruled in favor of the assessee, stating that depreciation not claimed in the return for normal computation of income must be allowed while computing deductions under Chapter VI A. The second question was answered in favor of the assessee as well, as it was consequential to the first question. The appeals were disposed of accordingly.

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