Capital goods credit and depreciation reversal require fresh verification before denying input credit eligibility.

Credit on capital goods was examined against the rule against double benefit where depreciation had also been claimed. The record indicated that the assessee had reversed the depreciation, including the amount relatable to the credit, in the income tax return, which would support admissibility of credit if verified. As the lower authorities had not properly examined the documents proving this factual position, the depreciation issue required fresh verification. The matter was remanded to the adjudicating authority for reconsideration, and credit would be admissible if the reversal of depreciation in the return was established.

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Issues: Whether credit on capital goods could be denied on the ground that depreciation was also claimed, and whether reversal of depreciation in the income tax return would amount to non-availment of depreciation so as to make the credit admissible.

Analysis: The dispute turned on the interaction between the depreciation claim in the books of account and the position taken in the income tax return. The appellant produced material to show that the depreciation, including the amount relatable to the credit availed, had been reversed in the return, and therefore there was no double benefit. The lower authorities had not properly examined the documents relied upon to establish this factual position. In such circumstances, the factual question whether depreciation had been availed on the relevant amount had to be verified afresh.

Conclusion: The matter was remanded to the adjudicating authority for reconsideration. If the depreciation was reversed in the return, the credit would be admissible.

Final Conclusion: The denial of credit was not finally sustained, and the matter was sent back for fresh examination of the depreciation issue and consequential eligibility of credit.

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