Tribunal upholds CIT(A)'s decision on depreciation claim for AY 1990-91

The Tribunal upheld the CIT(A)'s decision to disallow depreciation claimed by the assessee for the assessment year 1990-91. The Tribunal found the Gujarat High Court judgment cited by the assessee to be applicable, supporting the assessee's position. Additionally, the Tribunal recognized the Karnataka High Court's emphasis on the assessee's right to choose regarding depreciation claims. Dismissing the Revenue's reliance on the McDowell judgment, the Tribunal concluded that the CIT(A)'s decision was in line with legal principles and dismissed the Revenue's appeal.

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Issues:
Claim of depreciation by the assessee without filing working, CIT(A) allowing assessee's appeal to disallow depreciation, Dispute over allowing depreciation by AO, Interpretation of relevant case laws by both parties, Applicability of Gujarat High Court judgment, Karnataka High Court decision on depreciation claim as a choice left to assessee, AO not relying on McDowell judgment.

Analysis:
The appeal pertains to the claim of depreciation by the assessee for the assessment year 1990-91. The assessee-company opted not to claim depreciation, leading to a situation where no working of depreciation was filed with the return of income. However, the Assessing Officer (AO) allowed the depreciation during assessment, prompting the CIT(A) to direct the AO not to allow depreciation based on case laws cited by the assessee. The Departmental Representative contested this decision, emphasizing that depreciation allowance is crucial for computing income or loss under the Income Tax Act, regardless of the assessee's choice. The Representative relied on the Supreme Court's decision in McDowell & Co. Ltd. vs. CTO to support the Revenue's argument.

During the appeal, the assessee's counsel relied on the judgment of the Gujarat High Court in CIT vs. Arun Textiles, challenging the AO's stance that the judgment was inapplicable due to subsequent amendments to relevant sections. The counsel argued that the judgment remained valid post-amendment and supported the assessee's position. Reference was made to allied provisions to demonstrate the continued relevance of the Gujarat High Court's decision. The Tribunal examined the submissions and evidence, noting that the assessee's decision not to claim depreciation was based on the Gujarat High Court's ruling. Additionally, the Tribunal considered the Karnataka High Court's decision emphasizing the assessee's right to choose on depreciation claims.

Ultimately, the Tribunal upheld the CIT(A)'s order, citing the applicability of the Gujarat High Court's decision to the case at hand. The Tribunal also highlighted the supporting stance of the Karnataka High Court. Dismissing the Revenue's argument invoking the McDowell judgment, the Tribunal found no basis for its application in the current scenario. Consequently, the Tribunal concluded that the CIT(A)'s decision aligned with the jurisprudence and did not warrant interference. As a result, the appeal by the Revenue was dismissed.

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