Commissioner Of Income Tax v. Synergy Multibase Ltd.....opponent(S

O/TAXAP/821/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 821 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE A.J.DESAIandHONOURABLE MR.JUSTICE A.G.URAIZEE =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ?to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?law as to the interpretation of the Constitution of India or any order made thereunder ? ================================================================ COMMISSIONER OF INCOME TAX....Appellant(s) Versus SYNERGY MULTIBASE LTD.....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1MRS SWATI SOPARKAR, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE A.J.DESAIandHONOURABLE MR.JUSTICE A.G.URAIZEE Date : 20/07/2015 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE A.J.DESAI) 1. By way of filing this appeal under Section 260A of the Income-tax Act, 1961 the Commissioner of Income-tax,Valsadhadchallengedthe judgment/order dated 16[th] June 2006 passed by the Income-tax Appellate Tribunal, Ahmedabad Bench in of the Income-tax Act, 1961 the Commissioner of Income-tax,Valsadhadchallengedthe judgment/order dated 16[th] June 2006 passed by the Income-tax Appellate Tribunal, Ahmedabad Bench in ITA No.580/Ahd/2002. 2. The brief facts, shorn of unnecessary details for the purpose of disposal of this appeals, are that the assessee in Tax Appeal No. 821 of 2007 filed return of income on 29[th] November 1996 declaring loss of Rs. 32,95,074/-. The assessment under the purpose of disposal of this appeals, are that the assessee in Tax Appeal No. 821 of 2007 filed return of income on 29[th] November 1996 declaring loss of Rs. 32,95,074/-. The assessment under Section 143(3) of the Income Tax Act was completed and the Assessing Officer determined the loss at Rs.1,65,52,578/- by including the depreciation of Rs.1,32,57,504/- though the assessee had not claimed the depreciation. 3. This appeal was contested up to the Income Tax Appellate Tribunal, which decided against the revenue and in favour of the assessee. Therefore, the Revenue has preferred this appeal wherein the following questions are framed:Appellate Tribunal, which decided against the revenue and in favour of the assessee. Therefore, the Revenue has preferred this appeal wherein the following questions are framed: “(A) Whether on the facts and in the circumstances of the case and in law was the Tribunal right in holding that no depreciation can be thrust upon in this case, though the assessee has not forgone its right to claim depreciation in case of positive income? (B) Whether on the facts and circumstances of the case and in law was the Tribunal ought to have upheld that depreciation need to be worked out even in the cases where deduction under Chapter VI A is not claimed/allowed because of paucity of profits?” 4. We have heard Mr. Sudhir Mehta, learned advocate for the Revenue and Mr. Bandish S. Soparkar for the respondent.for the Revenue and Mr. Bandish S. Soparkar for the respondent. “(A) Whether on the facts and in the circumstances of the case and in law was the Tribunal right in holding that no depreciation can be thrust upon in this case, though the assessee has not forgone its right to claim depreciation in case of positive income? (B) Whether on the facts and circumstances of the case and in law was the Tribunal ought to have upheld that depreciation need to be worked out even in the cases where deduction under Chapter VI A is not claimed/allowed because of paucity of profits?” 4. We have heard Mr. Sudhir Mehta, learned advocate for the Revenue and Mr. Bandish S. Soparkar for the respondent.for the Revenue and Mr. Bandish S. Soparkar for the respondent. 5. At the outset, learned advocate Mr Mehta has fairly conceded that the question posed for our determination is no longer res integra in view of the latest Division Bench of this Court in the case of Sakun Polymers Limited v. Joint Commissioner of Income-tax (Assessment), (2015) 231 Taxman 532 (Gujarat) and therefore has urged that the appropriate order may be passed.fairly conceded that the question posed for our determination is no longer res integra in view of the latest Division Bench of this Court in the case of Sakun Polymers Limited v. Joint Commissioner of Income-tax (Assessment), (2015) 231 Taxman 532 (Gujarat) and therefore has urged that the appropriate order may be passed. 6. While learned advocate Mr Bandish S. Soparkar for the respondent has also relied upon the decision in the case of Sakun Polymers Limited (supra) and has further relied upon the unreported decision of the Division Bench of this Court in the case of Dy. CIT (Asst.) v. Sun Pharmaceuticals India Limited, Tax Appeal No.93 of 2000 decided on 17.12.2014. the respondent has also relied upon the decision in the case of Sakun Polymers Limited (supra) and has further relied upon the unreported decision of the Division Bench of this Court in the case of Dy. CIT (Asst.) v. Sun Pharmaceuticals India Limited, Tax Appeal No.93 of 2000 decided on 17.12.2014. 7. Having heard learned advocates on either side and upon perusing the judgment of Division Bench of this Court in the case of Sakun Polymers Limited (supra) and in the case of Dy. CIT (Asst.) v. Sun upon perusing the judgment of Division Bench of this Court in the case of Sakun Polymers Limited (supra) and in the case of Dy. CIT (Asst.) v. Sun Pharmaceuticals India Limited (supra) we are of the opinion that the question posed for our consideration has already been concluded by the aforesaid two Division Bench judgments of this Court wherein in paragraphs 6 to 11 of Sun Pharmaceuticals Limited (supra) it is held as under: “6. The learned counsel for the appellant felt that as the aforesaid question was not raised in this appeal should be raised in this appeal afresh after many years that the issue involved in the present case, requires re-consideration, and therefore, Civil Application being OJ CA No. 546 of 2010 was filed after Tax Appeal No. 2/2002 was decided, and pursuant to the order passed in OJCA No. 546 of 2010, vide order dated 26.11.2014, the following substantial question of law has been framed by this Court, which reads as under: “Whether, the Appellate Tribunal is right in law and on facts in holding that depreciation not claimed for by the assessee, cannot be allowed as a deduction despite the introduction of the concept of block assets?” 8. We have heard the learned counsels appearing for the parties and considered the submissions. Mr. the parties and considered the submissions. Mr. Soparkar learned counsel at the out set submitted that the question no. 2 cannot be re-agitated as it is covered by the decision of this Court in No. 546 of 2010 was filed after Tax Appeal No. 2/2002 was decided, and pursuant to the order passed in OJCA No. 546 of 2010, vide order dated 26.11.2014, the following substantial question of law has been framed by this Court, which reads as under: “Whether, the Appellate Tribunal is right in law and on facts in holding that depreciation not claimed for by the assessee, cannot be allowed as a deduction despite the introduction of the concept of block assets?” 8. We have heard the learned counsels appearing for the parties and considered the submissions. Mr. the parties and considered the submissions. Mr. Soparkar learned counsel at the out set submitted that the question no. 2 cannot be re-agitated as it is covered by the decision of this Court in Tax Appeal No. 175 of 2001 as well as Tax Appeal No. 2/2002 decided on 17.11.2014. However, Mr. Parikh learned counsel for Revenue submitted that the question of law as raised in this case was never decided in those matters, and therefore, he requested that the question of law be decided afresh. As both the questions of law are inter connected are decided together. 9. We have heard the learned counsel appearing for the parties at length. According to the learned counsel Mr. Parikh, the decision of the Full Bench of the Bombay High Court in the case of Plastiblends India Limited v. Additional Commissioner of Income-tax & Ors., reported in [2009] 318 ITR (Bom) will have to be applied to the facts of this case. Ld. Counsel has relied on the grounds of challenge raised in this appeal as it original was and amended.the parties at length. According to the learned counsel Mr. Parikh, the decision of the Full Bench of the Bombay High Court in the case of Plastiblends India Limited v. Additional Commissioner of Income-tax & Ors., reported in [2009] 318 ITR (Bom) will have to be applied to the facts of this case. Ld. Counsel has relied on the grounds of challenge raised in this appeal as it original was and amended. 10. In contra, learned counsel Mr. Soparkar for revenue has drawn our attention to the decision of the Honble Supreme Court in the case of Commissioner of Income Tax v. Mahendra Mills, reported in [2000] 243 ITR 56 and the decision of this Court in Tax Appeal 2/2002 and Tax Appeal No. 175/2001. It is submitted that the questions of law are concluded, but no elaborate reasons are to be given in view of the finding of fact and the question also having been answered in the case of Manehdra Mills (supra), and therefore, the decision of the Honble Supreme Court will enure for the benefit of the present assessee as the amendment is after 2000 and not prior thereto. 11.The decision cited by the learned counsel for the Revenue of the Bombay High Court (supra) cannot be applied in the facts of this case and as far as this question of law is concerned.for the Revenue of the Bombay High Court (supra) cannot be applied in the facts of this case and as far as this question of law is concerned. 12.This takes us to the original first question wherein also the learned counsel for the appellant has placed reliance on the decision of the Full Bench of Bombay High Court Plastiblends India Limited v. Additional Commissioner of Income-tax & Ors., reported in [2009] 318 ITR (Bom) and submitted that this appeal should be allowed.wherein also the learned counsel for the appellant has placed reliance on the decision of the Full Bench of Bombay High Court Plastiblends India Limited v. Additional Commissioner of Income-tax & Ors., reported in [2009] 318 ITR (Bom) and submitted that this appeal should be allowed. 13.As far as this aspect is concerned, the finding of fact recorded by the CIT(Appeals) which reads as under:finding of fact recorded by the CIT(Appeals) which reads as under: 13.As far as this aspect is concerned, the finding of fact recorded by the CIT(Appeals) which reads as under:finding of fact recorded by the CIT(Appeals) which reads as under: '3. The contentions of the appellant and the reasons given by the Assessing Officer in allowing full depreciation are considered. The decision of CIT v. Mother India Refrigeration (P) Ltd. (supra) relied on by the assessing Officer is not applicable in the instant case as the issue as to whether depreciation is optional or not was never before the Supreme Court. The second decision of Madras High Court in the case of Dasa Prakash Bottling Co. v. CIT (supra) will also not be applicable as the Gujarat High Court,which is jurisdictional High Court in the case of CIT v. Arun Textiles 192 ITR 700 did not agree with this decision. In the case of Arun Textiles (supra), the Gujarat High Court held that there is nothing in the provisions of section 32(1) read with section 29 of the Income-tax Act, 1961, to indicate that even when no claim is made for allowing deduction in respect of the depreciation under section 32(1), the Income-tax Officer is bound to allow a deduction. Under the scheme of the Act, income is to be charged regardless of depreciation on the value of the assets and it is only by way on an exception that section 32(1) grants an allowance in respect of depreciation on the value of the capital assets enumerated therein. There is intrinsic evidence under section 43(6)(b) of the Act in the expression less all depreciation actually allowed to show that it is not as if all allowable deductions are to be granted by the Income-tax Officer even when the assessee does not want the same. Sub-section (2)(a) of Section 143(3) of the Act provides that an assessee can object to such deduction made under section 143(1). Therefore, the assessee can come forward in such a case and make clear its intention that it does not want to compute depreciation on the assets and wants no benefit of claiming any depreciation in respect thereof. The Circular of CBDT 29 D (XIX-4) of 1965 (F. No. 45/239/65-ITJ), dated 31.8.1996) directed that, where the required particulars have not been furnished by the assessee and no claim for depreciation has been made in the return, the Income-Tax Officer should estimate the income without allowing depreciation allowance. Respectfully following the decision of the Gujarat High Court, I hold that the depreciation is optional to the assessee and once he chooses not to claim it, the Assessing Officer cannot allow it while computing the income. Further, once the depreciation is option, applying the same ratio of Gujarat High Court and other Courts, it will be optional for block of assets also. It is not necessary that O/TAXAP/821/2007 JUDGMENT the depreciation is allowable not allowable as a whole. The assessee can claim it partly also in respect of certain block of assets and not claim in respect of other block of assets. I, therefore, direct the Assessing Officer to withdraw depreciation allowance of Rs. 85,24,227/- not claimed by the appellant.'“a whole. The assessee can claim it partly also in respect of certain block of assets and not claim in respect of other block of assets. I, therefore, direct the Assessing Officer to withdraw depreciation allowance of Rs. 85,24,227/- not claimed by the appellant.'“ 14. In view of the aforesaid position of law settled by two Division Bench judgments of this Court we do not find any substance in this appeal Court we do not find any substance in this appeal the depreciation is allowable not allowable as a whole. The assessee can claim it partly also in respect of certain block of assets and not claim in respect of other block of assets. I, therefore, direct the Assessing Officer to withdraw depreciation allowance of Rs. 85,24,227/- not claimed by the appellant.'“a whole. The assessee can claim it partly also in respect of certain block of assets and not claim in respect of other block of assets. I, therefore, direct the Assessing Officer to withdraw depreciation allowance of Rs. 85,24,227/- not claimed by the appellant.'“ 14. In view of the aforesaid position of law settled by two Division Bench judgments of this Court we do not find any substance in this appeal Court we do not find any substance in this appeal and the questions framed for our consideration are answered in the negative. We hold that it is optional for the assessee whether or not to claim the depreciation and we further hold that the authorities below were right in law in holding that the depreciation which the assessee was not desirous of claiming cannot be foisted on him.are answered in the negative. We hold that it is optional for the assessee whether or not to claim the depreciation and we further hold that the authorities below were right in law in holding that the depreciation which the assessee was not desirous of claiming cannot be foisted on him. 15.Accordingly, the appeal is decided against the revenue and in favour of the assessee.the revenue and in favour of the assessee. (A.J.DESAI, J.) Asma (A.G.URAIZEE,J)