CIT vs Silvassa Industries Ltd.

In all these Appeals by the Revenue for the assessment years 2003-04, 2004-05 and 2005-06, following common question has been raised for our consideration:

Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in allowing depreciation to be computed on the basis of actual cost of the assets without reducing the depreciation of earlier years allowed to the Assessee even though not claimed by it and thereby ignoring Explanation 5 to section 32 of the Income Tax Act?

The assessing officer while passing assessment order for the three Assessment years had disallowed partly the claim for depreciation on the ground that in the earlier assessment years, the depreciation though not claimed was thrust upon the Assessee. Consequently, the written down value of the Plant & Machinery was less and the depreciation allowable was also lessor in the subject assessment year then that claimed. For the earlier assessment years, the Commissioner (Appeal), as well as the Tribunal had set aside the depreciation thrust upon the Respondent in view of the decision of the Apex Court in the matter of Commissioner of Income Tax Vs. Mahendra Mills, .

However, for the assessment year in question, it is the case of the Revenue that explanation 5 added the section 32 of the Income Tax Act, 1961 (the said Act) w.e.f. 1-4-2002 provides that depreciation shall be allowed whether or not the assessee has claimed the deduction in respect of depreciation in computing total income. Therefore, in view of the Explanation 5 to section 32 of the Act, the written down value of the Plant & Machinery would have to be recomputed and depreciation therefore restricted. This, the Revenue seeks to do by granting higher depreciation then that claimed in respect of earlier assessment years.

The Tribunal by the impugned order while upholding the order of the Commissioner (Appeals) records the fact that the parties appearing before it had agreed that the issue of allowing higher depreciation then that claimed in the earlier Assessment Years, was concluded by the decisions of the Co-ordinate Bench of the Tribunal for the earlier Assessment Year wherein depreciation was allowed only to the extent claimed by the Respondent. The Tribunal by the impugned order held that the assessment for earlier Assessment Years including the written down value of its Plant & Machinery were final. Therefore, it would not be possible to reopen the assessment for earlier years and invoke the Explanation 5 to section 32 of the said Act. Therefore, by the impugned order, the depreciation as claimed by the Respondent for the Assessment Years in question had been allowed.

We notice that the assessment for the earlier years were final as held by the Tribunal. Therefore, without disturbing the written down value of Plant & Machinery for the earlier years, it would not be possible to change the opening written down value of its Plant & Machinery for the subject assessment years. Moreover, the Explanation 5 added to section 32 of the Act would be applicable w.e.f. 1-4-2002 and could not unsettle the assessment orders for earlier years which are final and accepted both by the Revenue as well as the Assessee. In these circumstances, the position in law being self evident, as held by the Tribunal, we see no reason to entertain the proposed question of law.

Accordingly, all the three appeals are dismissed with no order as to costs.