2017 (8) TMI 244

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.... Tax Appellate Authority ('ITAT') in ITA Nos.1455-1459/Del/2014 for the Assessment Years ('AYs') 1989-90, 1993-94, 1997-98, 1999-2000, 2000-01. 2. The issue sought to be urged by the Revenue in these appeals is whether the ITAT erred in confirming the order of the Commissioner of Income Tax (Appeals) ['CIT (A)'] whereby it was held that the deductible income under Section 10 (29) of the Act is to be computed after excluding depreciation as part of the expenditure and taking gross receipts from warehousing and Inland Container Depot/ Container Freight Station ('ICD/CFS'). 3. According to the Revenue, depreciation is like any other business expense which is debited to the profit and loss account and, which, goes to reduce the tax liabil....

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....ch it is realized. Section 41(2) as it stood at the material time stated that if in respect of any plant and machinery, any depreciation had been allowed and subsequently such plant and machinery was sold, discarded or destroyed, the assessee might get some value either as a result of sale or insurance or from salvage or compensation thereabout. The necessity to keep Section 41(2) as a provision in addition to Section 41(1) arose from the fact that, in its very nature, depreciation is neither a loss, nor an expenditure, nor a trading liability, referred to in Section 41(1). The depreciation recovered on sale of the capital asset was includible in the total income as balancing charge only under Section 41(2). That concept was foreign to the ....

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....44 ITR 192 where the Supreme Court has, while explaining the scheme of Section 32 of the Act in the context of whether depreciation is allowable vis-a-vis a building, observed that "the depreciation as a general principle represents the diminution in value of capital asset when applied to the purpose of making profit or gain. The object is to get true picture of real income of the business." 9. The Court is satisfied that neither the CIT (A) nor the ITAT has committed any legal error in concluding that for the purposes of Section 10(29) of the Act 'depreciation' is not an expense but allowance. 10. No substantial question of law arises for consideration from the order of the ITAT. The appeals are, accordingly, dismissed but in the cir....