Modvat credit and withdrawn depreciation claim: accepted revised return prevents denial for alleged dual tax benefit

Modvat credit on capital goods could not be denied merely because depreciation under the Income-tax Act had initially been claimed, where that depreciation claim was later withdrawn by revised return and the revised return was accepted. The accepted factual position showed that the assessee had not finally retained a simultaneous tax benefit on the duty component of the capital goods. The contrary precedent was distinguished on its facts, and the corrected return removed the bar against credit. The result was that the prohibited dual benefit was not established on the facts accepted by the appellate authorities.

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Issues: Whether Modvat credit on capital goods could be denied on the ground that depreciation had been claimed under the Income-tax Act, where the depreciation claim was later withdrawn by revised return and accepted.

Analysis: The entitlement to Modvat credit turned on whether the assessee had in fact availed depreciation on the duty component of the capital goods. The factual finding accepted by the appellate authorities was that the depreciation claim was withdrawn through a revised return and that the revised return stood accepted. On that basis, the assessee was not shown to have taken simultaneous benefit under both tax regimes. The Court distinguished the relied-upon contrary precedent on its facts and accepted the view that the corrected position removed the bar against credit.

Conclusion: Modvat credit could not be denied, and the appeal failed.

Final Conclusion: The assessee was held entitled to retain the credit because the prohibited dual benefit was not established on the accepted facts.

Ratio Decidendi: Where the assessee has not finally retained depreciation on the duty element of capital goods and the revised return withdrawing that claim is accepted, Modvat credit cannot be refused on the ground of simultaneous benefit.

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