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PETITIONER: COMMISSIONER OF INCOME TAX

       Vs.

RESPONDENT: MAHENDRA MILLS

DATE OF JUDGMENT:       15/03/2000

BENCH: D.P.Wadhwa, S.S.M.Quadri

JUDGMENT:

     D.P.  WADHWA, J.

     A  common question of law arises in these appeals.  It is:

     "Whether, on the facts and in the circumstances of the case,  the  Tribunal was right in coming to  the  conclusion that  the  Income-tax Officer could not  grant  depreciation allowance  to  the assessee under the Income-tax  Act,  1961 when the same was not claimed by the assesse?"

     The  question was referred at the instance of  Revenue to  the  High  Court by the Income  Tax  Appellate  Tribunal (’Tribunal’  for  short)  for its opinion  and  answered  in affirmative  in  favour  of  the assessee  and  against  the Revenue.   This  question has been answered  differently  by various  High  Courts one in favour of the assessee and  the other in favour of the Revenue.

     Section 32 has since been amended by the Taxation Laws (Amendment  and  Miscellaneous Provisions) Act,  1986,  with effect  from 1.4.1988.  However, the answer to the  question remains  of  substantial importance as various  matters  are stated  to  be  pending  in  the  High  Courts  relating  to Assessment  Years prior to 1.4.1988.  Section 32 as it stood prior to 1.4.1988, in relevant part, is as under :

     "32.   (1)  In respect of depreciation  of  buildings, machinery, plant or furniture owned by the assessee and used for  the  purposes  of  the   business  or  profession,  the following  deductions  shall, subject to the  provisions  of section 34, be allowed

     (i) ............

     (ii)  in  the case of buildings, machinery,  plant  or furniture,  other  than  ships covered by clause  (i),  such percentage  on the written down value thereof as may in  any case or class of cases be prescribed:

     Provided  that where the actual cost of any  machinery or plant does not exceed seven hundred and fifty rupees, the actual  cost  thereof  shall be allowed as  a  deduction  in

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respect  of  the  previous year in which such  machinery  or plant  is first put to use by the assessee for the  purposes of his business or profession:

     Provided  further  that no deduction shall be  allowed under  this  clause  or  clause  (iii)  in  respect  of  any motor-car  manufactured outside India, where such  motor-car is  acquired by the assessee after the 28th day of February, 1975, and is used otherwise than in a business of running it on hire for tourists;"

     "32(2)  Where, in the assessment of the assessee  (or, if the assessee is a registered firm or an unregistered firm assessed  as  a  registered firm, in the assessment  of  its partners),  full  effect  cannot be given to  any  allowance under  clause  (i) or clause (ii) or clause (iia) or  clause (iv)  or  clause  (v) or clause (vi) of sub-section  (1)  or under  clause (i) of sub-section (1A) in any previous  year, owing to there being no profits or gains chargeable for that previous  year, or owing to the profits or gains  chargeable being  less  than  the  allowance,   then,  subject  to  the provisions of sub- section (2) of section 72 and sub-section (3) of section 73, the allowance or part of the allowance to which  effect has not been given, as the case may be,  shall be added to the amount of the allowance for depreciation for the  following  previous year and deemed to be part of  that allowance,  or  if  there  is no  such  allowance  for  that previous  year,  be  deemed  to be the  allowance  for  that previous year, and so on for the succeeding previous years."

     We may also quote Sections 28 and 29 :

     "28.   The  following  income shall be  chargeable  to income-tax  under the head "Profits and gains of business or profession", -

     (i)  the  profits  and  gains   of  any  business   or profession  which was carried on by the assessee at any time during the previous year;

     (ii)  any  compensation  or other payment  due  to  or received by, -

     (a) any person, by whatever name, called, managing the whole or substantially the whole of the affairs of an Indian company,  at  or in connection with the termination  of  his management  or the modification of the terms and  conditions relating thereto;

     (b)  any person, by whatever name called, managing the whole  or substantially the whole of the affairs in India of any  other company, at or in connection with the termination of  his  office  or  the   modification  of  the  terms  and conditions relating thereto;

     (c)  any  person, by whatever name called, holding  an agency  in India for any part of the activities relating  to the  business of any other person, at or in connection  with the  termination  of the agency or the modification  of  the terms and conditions relating thereto;

     (d)  any person, for or in connection with the vesting in the Government, or in any corporation owned or controlled by  the  Government,  under any law for the  time  being  in

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force, of the management of any property or business;

     (iii)  income  derived  by a  trade,  professional  or similar association from specific services performed for its members;

     (iv)  the value of any benefit or perquisite,  whether convertible  into money or not, arising from business or the exercise of a profession.

     "Income   from  profits  and   gains  of  business  or profession, how computed

     29.   The  income referred to in section 28  shall  be computed  in  accordance  with the provisions  contained  in sections 30 to 43A."

     Assessee  is  a  company  and  maintains  accounts  on mercantile basis.  For the assessment year 1974-75, assessee did  not  claim  any   depreciation.   Income-tax   Officer, however,  allowed  depreciation.  Assessee appealed  to  CIT (Appeals)  who  allowed the appeal.  Revenue then  took  the matter  to  the Tribunal which dismissed the appeal  of  the Revenue.   At  the instance of the Revenue, the question  of law as set out in the beginning of the judgment was referred to  the  Gujarat High Court for its opinion.  High Court  by the  impugned  judgment  following its earlier  decision  in Chokshi  Metal  Refinery  vs.  Commissioner  of  Income-Tax, Gujarat-II  [(1977) 107 ITR 63 (Guj)] answered the  question in  affirmative,  in favour of the assessee and against  the Revenue.   Aggrieved,  revenue  has   come  to  this  Court. Income-tax  Officer in Assessment Order noted that  assessee did not claim current depreciation.  It was contended before him  that the allowance of depreciation is a right given  to the  assessee  and  like  all other  rights  and  privileges assessee  has  full freedom to claim or not to claim it  and that  right cannot be a burden.  A privilege cannot be to  a disadvantage  and  an  option cannot become  an  obligation. Income-tax  Officer  did  not accept the contention  of  the assessee  and computed the current depreciation for a sum of Rs.37,61,652/- which he allowed.  Mr.  Verma, learned senior counsel  for the Revenue submitted that Sections 28, 29  and 32(1)  and  32(2)  are  to be read  together  and  so  read, depreciation  had  to  be allowed under law and  it  is  not relevant  if it is claimed by the assessee or not.  He  said there  is  conflict of judgments of the High Courts.   While some  judgments  support the view canvassed by  him,  others support  the view of the assessee.  Section 28 lays down  as to  what Income shall be chargeable to income tax under  the head  "Profits  and  gains of business  or  profession"  and Section  29  mandates that income referred to in Section  28 shall   be  computed  in   accordance  with  the  provisions contained  in  Sections  30  to 43A.  That  being  the  law, Income-  tax Officer was bound to allow depreciation whether the assessee chooses to claim the same or not.  To arrive at the  profit,  depreciation has to be deducted  commercially, accountably  as well as statutorily.  Written down value  of the  plant  and machinery for the next year will have to  be claimed  which  cannot  be  the written down  value  of  the current  year.   Sub- section (2) of Section  32  prescribes mechanism  as  to how the deduction is to be  allowed.   Mr. Verma  said  if  the claim for depreciation was  a  case  of choice  for  the assessee, it would negate the  decision  of this  Court  in  Commissioner of  Income-Tax,  Calcutta  vs.

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Jaipuria China Clay Mines (P) Ltd.  [(1966) 59 ITR 555 (SC)] and  Garden  Silk  Weaving   Factory  vs.   Commissioner  of Income-tax  [(1991)  189 ITR 512 (SC)].  Income-tax  Officer during the course of assessment can call for the records.

     Mr.   Verma said that during the course of  assessment proceedings,  Income-tax  Officer can call for  the  account books  of the assessee, look into the same and calculate the depreciation  allowable under Section 32.  To carry  forward loss  one has to arrive at the net income which can be  done only after adjusting depreciation though now after change in law  depreciation  cannot be carried forward beyond  certain years.   Mr.   Verma submitted that looking at the  language used  in Section 29 the Income-tax Officer is duty bound  to allow  depreciation in order to compute the income  referred to  in  Section 28 of the Act which he is to do  keeping  in view  of the provisions contained in Sections 30 to 43  (now Section  43D).   The  assessee need not make any  claim  for depreciation  of  the current year.  It is admissible  under the  law.  Section 32 only requires as to how the  allowance of  depreciation  is  to  be quantified.  As  any  claim  of depreciation  made  by  the assessee is not binding  on  the Income-tax  Officer similarly not to claim the same is  also not  binding on the Income- tax Officer and he can from  the available  material  allow  admissible   deduction  for  the current year in arriving at the true income of the assessee.

     Mr.   Dastur,  who on our request appeared  as  amicus curiae,  submitted that view canvassed by the Revenue is not correct.    He  said  if  the   assessee  does   not   claim depreciation  or  does not furnish particulars for  claiming depreciation  as  prescribed under Section 34 of the Act  in his  return  of income, depreciation cannot be  thrust  upon him.   To get depreciation allowance, there must be a  claim for  that under Section 32 which would subject to furnishing of  particulars  under  Section  34 of the  Act.   The  word "furnishing"  in  Section  34  would  mean  ’what  is  given voluntarily’.   Section 34 of the Act prescribes  conditions for  depreciation allowance.  Sub-section (1) of Section  34 is  relevant  and it is as under :  "34.(1)  The  deductions referred  to  in  sub-section  (1) of  sub-section  (1A)  of section  32  shall  be  allowed   only  if  the   prescribed particulars have been furnished;  and the deduction referred to  in  section 33 shall be allowed only if the  particulars prescribed  for the purpose of clause (i) and clause (ii) of sub-section  (1)  of section 32 have been furnished  by  the assessee in respect of the ship or machinery or plant."

     Mr.   Dastur  referred  to a circular of  the  Central Board   of   Direct  Taxes   (CBDT)  which   provides   that depreciation  could not have been allowed.  Circular of  the Central Board of Revenue (No.  29D (XIX-14) of 1965, F.  No. 45/239/65.ITJ  dated August 31, 1965) was to the effect 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".   Thus, unless  the  particulars of depreciation are  furnished,  no depreciation allowance could be allowed.  He referred to yet another  circular of the CBDT which provides that it is  the duty of the Income Tax Officer to advise the assessee of his right  to claim depreciation etc.  but that would arise only if  the  assessee is ignorant of his right.   Moreover,  the duty  of  the  Income Tax Officer is to give advice  to  the assessee  of  his  right and no more.  The circular  of  the

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Central  Board  of Revenue (No.  14 (SL- 35) of  1955  dated April  11, 1955) required the officers of the department "to assist  a taxpayer in every reasonable way, particularly  in the   matter  of  claiming   and  securing  reliefs.    .... Although, therefore, the responsibility for claiming refunds and  reliefs rests with the assessees on whom it is  imposed by  law,  officers should  (a) draw their attention to  any refunds  or  reliefs  to  which they appear  to  be  clearly entitled  but  which  they have omitted to  claim  for  some reason  or other......" When there are two provisions  under which  an  assessee could claim some benefit, it is for  the assessee  to  choose one.  Reference was made to  claim  for medical   reimbursement  for  the   current  year  which  is different  than claim for depreciation.  This is so  because depreciation  is  a  claim  on written  down  value  and  if depreciation  is  not claimed in the current  year,  written down  value  would remain the same for the  following  year. Prior  to the amendment of Section 32 business loss could be carried  forward  for eight years.  There was no time  limit for  the  claiming  of depreciation.  This is  not  so  now. Earlier,  therefore, it was always for the assessee to claim business  loss first and current depreciation thereafter  if he  so desired.  There was, thus, basic difference in  carry forward loss and carry forward unabsorbed depreciation.  Mr. Dastur  said it is not correct to say that if the contention of  the assessee is correct, that would negate the  decision of the Supreme Court in the cases of CIT vs.  Jaipuria China Clay  Mines [59 ITR 555] and Garden Silk Weaving Factory vs. CIT  [189  ITR  512].  He then referred to Rule 5AA  in  the Income  Tax  Rules, 1962 (Rules) which was inserted  by  the Income Tax (Amendment) Rules, 1981 with effect from April 1, 1981.  It was omitted by Income Tax (Third Amendment) Rules, 1987  with effect from April 2, 1987.  Rule 5AA is as under: -

     "5AA.   (1) For the purposes of the deduction referred to  in sub-section (1) or sub-section (1A) of section 32 and sub-section  (1)  of section 32A, the following  particulars shall be furnished in a columnar form, namely:  -

     (i)  description  of  assets in respect  of  building, indicate  whether the building is taken on lease or is owned by the assessee;

     (ii) written down value of existing assets;

     (iii)  actual  cost  of  assets  acquired  during  the previous year;

     (iv) capital expenditure on additions or alterations;

     (v)  period  of  user  only where  return  relates  to assessment year 1969-70 or any earlier year;

     (vi)  amount  of  moneys payable and  scrap  value  in respect of assets sold, discarded, demolished or destroyed;

     (vii)  amount on which depreciation is allowable total of  items  (ii)  to (iv) exclusive of  amounts  relating  to assets referred to in item (vi);

     (viii) rate of depreciation;

     (ix)  total number of days worked to be furnished only if extra shift allowance is claimed;

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     (x)  total  number of days worked  double  shift  and triple  shift (to be furnished only if extra shift allowance is claimed);

     (xi) depreciation claimed

     (a) initial depreciation;

     (b)  normal depreciation (including extra depreciation for approved hotels);

     (c) additional depreciation;

     (d)  extra-shift  allowance  double shift and  triple shift;

     (xii) total depreciation;

     (xiii)  investment  allowance claimed  (also  indicate rate);

     (xiv)   remarks  (indicate  the   amount  of   initial depreciation,  investment  allowance or  development  rebate allowed in respect of the assets in an earlier year).

     (2)  Where the depreciation in respect of any asset is not  admissible  as  a deduction under clause (ii)  of  sub- section  (4) of section 37 or sub-clause (ii) of clause  (c) of  section  40  or sub-clause (ii) of clause  (a)  of  sub- section  (5)  of  section 40A, such  depreciation  shall  be excluded for the purposes of sub-rule (1)."

     This   Rule  5AA  prescribed   the   particulars   for depreciation  necessary  to  be furnished for  allowance  of depreciation.   Prior  to  insertion of Rule 5AA  return  of income   tax   in  the   form  prescribed  itself   required particulars   to  be  furnished  if  the  assessee   claimed depreciation.   Mr.  Dastur said that the case set up by the assessee  before the Income Tax Officer was correct.  It was wrong  on  the  part  of the Income Tax  Officer  to  refuse depreciation  in  the  face of the provision of law  to  the contrary.   He  said that calling the books of the  assessee for the purpose of computing depreciation is of no relevance inasmuch  as depreciation in the books cannot necessarily be the amount of depreciation which is allowable under the Act.

     Section  37  also uses the words "shall be allowed  in computing  the  income chargeable".  Under this Section  any expenditure  which  is  not   expenditure  as  described  in Sections  30 to 36 and is also not in the nature of  capital expenditure  or  personal expenses and laid out or  expended wholly  or  exclusively  for  the  purpose  of  business  or profession of the assessee shall be allowed in computing the income  chargeable  under  the head "Profits  and  gains  of business  or profession".  It was submitted that expenditure can  be  allowed  only  if it is claimed.   Similar  is  the language  used  in  Section  34  of  the  Act.   Here   also depreciation  can  be  allowed only if it is  claimed  after giving  necessary  particulars  as required in a  return  of income, which is to be submitted in the form prescribed.  If reference  is  made  to the form of return relevant  at  the time,  complete  details  are required to be given  for  the purpose of claiming depreciation.  This is under the heading "Statement   of  particulars   under  Section   32A(4)/34(1)

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regarding investment allowance, depreciation and development rebate".

     The  provisions  contained in Sections 34 and 37  were contrasted  with Section 16 which deals with deduction  from salary.   The language here is "the income chargeable  under the  head  "salary"  shall  be  computed  after  making  the following deductions namely:  -".

     Mr.  Dastur like Mr.  Verma also referred to judgments of  the  High Courts giving diverse views.  High  Courts  of Allahabad  and  Madras supported the view canvassed  by  the Revenue while the High Courts of Bombay, Gujarat, Punjab and Haryana,  Karnataka,  Andhra  Pradesh, Calcutta  and  Kerala supported  the  case of the assessee.  We may now  refer  to some  of  the  judgments  cited at the  Bar  beginning  with Jaipuria  China  Clay Mines and Garden Silk Weaving  Factory cases.   Commissioner of Income Tax, Calcutta vs.   Jaipuria China  Clay  Mines (P) Ltd.  [(1966) 59 ITR 555 (SC)] was  a case  under  the Income Tax Act, 1922.  The  question  which came  up for consideration before this Court was:  "whether, in  the facts and circumstances of the case, the  unabsorbed depreciation  of  the  past  years should be  added  to  the depreciation  of  the current year and the aggregate of  the unabsorbed   depreciation  of  the   current  year  and  the aggregate  of  the unabsorbed depreciation and  the  current year’s depreciation be deducted from the total income of the previous year relevant for the assessment year 1952-53?"

     The  Court  noted  the following facts in the  case  : "The  Income-tax  Officer  assessing  the  respondent,  M/s. Jaipuria  China  Clay Mines (P) Ltd., Calcutta,  hereinafter referred  to as "the assessee" for the year 1952-53 computed its  total income at Rs.14,041 before charging  depreciation for  that  year.  From that figure he deducted  depreciation for  the year amounting to Rs.5,350, thus computing a profit of  Rs.8,681.   From this figure he deducted  an  equivalent amount, i.e., Rs.8,681, in respect of losses during 1947-48, and  he thus worked out the business income as nil.  He then computed  the dividend income at Rs.2,01,130 and  determined the  total income at this figure and levied tax on it.   The assessee  had  in  its  favour  an  unabsorbed  depreciation aggregating  to  Rs.76,857  and  it  contended  before   the Income-tax Officer that this sum should be deducted from the income received from dividends, which, if done, would reduce the  total income to Rs.1,32,955, but the Income-tax Officer refused  to  accede  to   this  contention.   The  Appellate Assistant  Commissioner  upheld the order of the  Income-tax Officer  and the assessee’s appeal to the Appellate Tribunal met  with the same fate.  The High Court, however,  accepted the  contention  of the assessee and answered  the  question referred to it in favour of the assessee."

     The  Court  said  that  the  answer  to  the  question depended upon the interpretation of Sections 6, 10 and 24 of the 1922 Act.  The Court also observed that it was concerned with  the law as it stood on April 1, 1952.  It analysed the sections  stating that the scheme of the Act is that the tax is  levied  in respect of the total income of  the  previous year  of every individual, Hindu undivided family, etc., and the total income consists of income under various heads such as  Salaries, Interest on securities, Income from  property, Profits  and gains of business, profession or vocation,  and Income  from  other  sources  and  Capital  gains.   Various sections  deal with how income, profits and gains under each

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head  have  to  be  computed.  Section  10  deals  with  the computation  of profits and gains of any business carried on by  an  assessee.  Section 10(2) prescribes  the  allowances which  have to be deducted before computing the profits  and gains;  one of the allowances is "depreciation", and this is provided  under  sub-clause (vi).  Section 24  provides  for set-off  of  losses  in computing aggregate  income.   After referring  to  proviso (b) to Section 10(2)(vi)  this  Court observed:   "Apart from authority, looking at the Act as  it stood on April 1, 1952, it is clear that the underlying idea of  the  Act is to assess the total income of  an  assessee. Prima  facie, it would be unfair to compute the total income of  an  assessee  carrying on business without  pooling  the income  from  business with the income or loss  under  other heads.   The second consideration which is relevant is  that the  Act  draws no express distinction between  the  various allowances  mentioned in section 10(2).  They all have to be deducted  from  the gross profits and gains of  a  business. According  to  commercial principles, depreciation would  be shown  in the accounts and the profit and loss account would reflect  the depreciation accounted for in the accounts.  If the  profits are not large enough to wipe off  depreciation, the  profit and loss account would show a loss.   Therefore, apart from proviso (b) to section 10(2)(vi), neither the Act nor  commercial principles draw any distinction between  the various  allowances  mentioned in section 10(2);   the  only distinction  is  that  while  the other  allowances  may  be outgoings, depreciation is not an actual outgoing."

     Proviso (b) to Section 10(2)(vi) is as under:  -

     "(b)  where,  in the assessment of the assessee or  if the  assessee is a registered firm, in the assessment of its partners,  full effect cannot be given to any such allowance in  any  year not being a year which ended prior to the  1st day of April, 1939, owing to there being no profits or gains chargeable  for that year, or owing to the profits or  gains chargeable  being less than the allowance, then, subject  to the  provisions of clause (b) of the proviso to  sub-section (2) of section 24, the allowance or part of the allowance to which  effect has not been given, as the case may be,  shall be added to the amount of the allowance for depreciation for the  following year and deemed to be part of that  allowance for  depreciation  for the following year and deemed  to  be part of that allowance, or if there is no such allowance for that  year, be deemed to be the allowance for that year, and so on for succeeding years."

     In  conclusion  this Court agreed with the High  Court and  answered  the question in favour of the  assessee.   In Garden  Silk Weaving Factory vs.  Commissioner of Income-Tax [(1991)  189 ITR 512 (SC)] questions before this Court were: "(1)  Whether, on the facts and in the circumstances of  the case,  the  Tribunal  was right in law in holding  that  the assessee,  a  registered firm, is entitled to carry  forward unabsorbed  depreciation from earlier years and that it will be  deemed to be an allowance in the nature of  depreciation in  the  previous  year  relevant to  the  assessement  year 1968-69?   (2)  Whether the claim of the assessee  to  carry forward  and  set off loss of Rs.3,49,242 against its  total income  for  the  assessment year 1968-69 has  been  rightly rejected?" It will be seen that the issues which were before the Court are not the same which we are now considering.  In the  case of Garden Silk Weaving Factory reliance was  again

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placed  on  the earlier decision of this Court  in  Jaipuria China  Clay  Mines  (P) Ltd.’s case.  The  whole  stress  of argument  of  Mr.   Verma  was that net  income  has  to  be ascertained  and for that purpose Income Tax Officer is duty bound  to look into the amount of depreciation available for that  assessment  year and to allow credit for the  same  to arrive  at  the  net  income.  This, he said,  would  be  so irrespective  whether the assessee has claimed  depreciation or  not  and whether particulars of depreciation  have  been furnished  or  not.  We do not think these two judgments  of this Court on which strong reliance was placed by Mr.  Verma advance  his  case.   Issues in those  cases  were  entirely different  having no bearing on the question before us.  CIT vs.   Dharampur Leather Co.  Ltd.  [(1966) 60 ITR 165  (SC)] was  a case under the Income-tax Act, 1922.  Sub-section (1) of  section 10 deals with the tax payable by an assessee  in respect  of the profits or gains of any business, profession or  vocation  carried on by him.  Sub-section  (2)  requires such  profits  or  gains  to be computed  after  making  the allowances  therein set out.  Clause (vi) thereof speaks  of allowances   in  respect  of   depreciation  of   buildings, machinery,  plant, etc., and the proviso (a) to clause  (vi) reads  thus:  "Provided that the prescribed particulars have been  duly  furnished".  In proceedings for  the  Assessment Year  1955-56, the Income-tax Officer held that depreciation must  be  computed  as if income of the  assessee  had  been worked  out  properly  in  the earlier  years  when  it  was exempted  and  depreciation  had been allowed at  the  usual rates.    It  was  contended  by   the  assessee   that   no depreciation  had  in  fact  been actually  allowed  to  the assessee   in   any  earlier   years  and,  therefore,   the depreciation  should  be  computed on the original  cost  of various items of plant and machinery and other assets of the assessee.   The  Income-tax Officer, however, rejected  this contention  and  held that depreciation must be computed  on the  written  down  values of machinery computed as  if  the income  of the assessee had been worked out properly in  the years  when  the company was exempted and  the  depreciation being  allowed  at  the usual rates.   The  assessee  failed before   the  Appellate  Assistant   Commissioner  and   the Appellate  Tribunal.   The Appellate Tribunal held that  the words "actually allowed" in section 10(5)(b) of the Act were wide  enough  to cover the case of the assessee.   The  High Court,  however,  held  that  if  in  the  prior  years   no depreciation  had been actually allowed then the actual cost incurred  by the assessee for acquiring the machinery  would be  the  written  down value of the machinery.   This  Court rejected  the  contention  of the Revenue that on  a  proper interpretation   of   Section  10(5)(b)  of  the   Act   the depreciation  must  be  deemed to have been allowed  to  the assessee  for the years in which the income of the  assessee was  exempted.   The Court interpreted the  words  "actually allowed"  occurring  in  Section 10(5)(b) to hold  that  the words  "actually  allowed"  did  not  include  any  notional allowance.   In Beco Engineering Co.  Ltd.  vs.  CIT [(1984) 148  ITR  478  (P&H)] assessee claimed depreciation  in  its original  return.  Later he filed a revised return in  which he  withdrew the claim for depreciation.  Income-tax Officer was  of the view that it was statutorily binding upon him to compute  the total income which must take into consideration the  deduction  of depreciation allowance.  High Court  held that  in  case  the assessee had  not  claimed  depreciation allowance he could not be granted the same by the Income-tax Officer.   In  regard to the revised return High Court  took the view that the original return could not be adverted to.

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     In  CIT  vs.  Shri Someshwar Sahakari Sakhar  Karkhana Ltd.   [(1989)  177 ITR 443 (Bom.)] two issues were  raised. One  issue  was  whether the assessee had a  choice  in  the matter  of  claiming a deduction on account of  depreciation and  the  second  issue was whether, having claimed  in  the original return, the Income-tax Officer was entitled to rely on  the particulars furnished therein and allow a  deduction on  account of depreciation regardless of the fact that  the assessee  had  stated in the revised return that he did  not want  it.   After  examining judgments of the  various  High Courts  and of this Court in CIT vs.  Dharampur Leather  Co. Ltd.  [(1966) 60 ITR 165 (SC)] the Court said:  -

     "In  our  view,  to  sum up on the  first  issue,  the assessee  has a choice to claim or not to claim a  deduction on  account of depreciation.  If he chooses not to claim it, the  Income-tax Officer is not entitled to allow a deduction on account of depreciation."

     In  CIT  vs, Friends Corporation [(1989) 180  ITR  334 (P&H)] the question before the High Court was whether on the facts  and  in the circumstances of the case  the  Appellate Tribunal  was  right in law in holding that  the  Income-tax Officer  could not suo motu allow depreciation on the  three tankers  held by the assessee.  Second question was  whether on  the  facts  and  in the circumstances of  the  case  the Tribunal was right in law in accepting the contention of the assessee  that  he  had not made an effective claim  in  the return  for claiming depreciation.  For the Assessment  Year 1976-77  assessee filed its return of income showing loss of Rs,22,521/-.   No  particulars of the depreciation  for  the tankers were filed.  Income-tax Officer, however, worked out depreciation  on  the tankers from what he gleaned from  the assessee’s  account.   High  Court  said  that  depreciation allowance  is,  at  any  rate, a benefit  available  to  the assessee  to  avail of, but if the assessee chooses  not  to claim  it,  it would be contrary to reason and law  to  hold that it must be forced upon him.  High Court said:

     "There   is   no  gainsaying    that   allowance   for depreciation  is  a  benefit available to  the  assessee  to claim,  but not one that can be thrust upon him against  his wishes.   At  any rate, in order to claim depreciation,  the assessee   must  furnish  the   requisite   particulars   as prescribed  by  the  Income-tax  Act   and  the  Rules  made thereunder.   In  the  absence  of  such  particulars,   the assessee  cannot  avail  of,  nor  indeed  can  he  be  held entitled,  to  depreciation.  It would be pertinent in  this behalf  to  advert  to the judgment of this  Court  in  Beco Engineering  Co.  Ltd.  v.  CIT [1984] 148 ITR 478, where  a reference  was  made to Circular No.  29D(XIX- 14) of  1965, dated August 31, 1965, issued by the Central Board of Direct Taxes  which  provides 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.  Further, it was held that from the language  of  section  32(1)(ii)  and 34(1)  read  with  the circular,  it  was  clear that in case an assessee  had  not claimed  depreciation, the Income-tax Officer could not give him depreciation allowance."

     In  CIT  vs.   Arun Textiles "C" [(1991) 192  ITR  700 (Guj.)]  the assessee withdrew the claim of depreciation  in

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the revised return.  Income-tax Officer nevertheless allowed depreciation, which was claimed in the original return.  The Court  noticed  from the provisions of section 32(1) of  the said  Act  that the deduction in respect of depreciation  on the  items mentioned therein shall be allowed subject to the provisions of section 34 of the Act.  Under section 34(1) of the  said Act as was applicable during the relevant year, it was, inter alia, provided that the deductions referred to in sub-section  (1) of section 32 shall be allowed only if  the prescribed  particulars  have  been   furnished.   The  form prescribed  by rule 12 required particulars to be given  for the  purpose  of  the claim for deductions  under  the  said provision.   It is not that when depreciation is  allowable, the Income-tax Officer has no option but to grant it even if the  assessee  makes  clear its intention not to  claim  the depreciation.  The Court said:  -

     "Under  clause (ii) of sub-section (1) of section  32, such  percentage on the written down value of the  specified assets  is  to be allowed as a deduction in respect  of  the depreciation  of  the assets.  It appears that allowance  in such  cases  is, therefore, to be calculated on the  written down  value of the assets.  The written down value of assets is  defined  in section 43(6) of the Act and, in respect  of the  assets  acquired  prior  to the  accounting  year,  the written  down value would be the actual cost of  acquisition less  the aggregate of all the deductions "actually allowed" to  the  assessee in the past years.  It would follow  that, where  depreciation may be merely allowable but which is not computed, it cannot be said to have been "actually allowed". Therefore,  depreciation which is not claimed cannot be made to  reflect in the written down value of the assets.  If the idea  behind  the provisions was to provide  for  compulsory deductions for the depreciation, then the written down value of  assets acquired before the previous year would have been defined  so  as  to mean actual cost less  all  depreciation allowable  and not "actually allowed" as provided in section 43(6)(b) of the Act.  The provisions of section 32(1) of the Act  are  intended  to  confer benefit on  the  assessee  of claiming deductions on account of depreciation in respect of the specified classes of assets and, whenever it is claimed, it ought to be allowed."

     High  Court also noticed that in that case  admittedly the  assessee  had filed his revised return in which he  has not  claimed  deductions  in respect of  depreciation  under Section 32(1)(ii) of the Act and said:  -

     "The  provisions  of section 32 are intended  to  give benefit  to the assessee for claiming deductions in  respect of  depreciation  on the type of assets  mentioned  therein. Furthermore,  a mere claim to deduction would not be  enough since  the  deductions  are  to be allowed  subject  to  the provisions   of   section  34   which   required   necessary particulars   to  be  furnished  in  the  prescribed   form. Therefore,  until a claim is made for allowing deductions of the  nature  covered under section 32 along  with  necessary particulars,  there  would  hardly be any occasion  for  the Income-tax  Officer to "allow" any claim.  In the context in which  the  word "allowed" is used in section 32(1),  it  is clear to us that the meaning intended is "to admit something claimed".   The  word "allowed" means "to accept as true  or valid,  to  acknowledge admit, grant", "to  admit  something claimed,  to  acknowledge  grant, concede" (See  the  Oxford English  Dictionary,  Volume  I, 1970 Reprint,  page  2392).

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There  is  nothing in the provisions of section  32(1)  read with  section  29 of the Act 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.  In our view, it is implicit in the  said  provisions that the assessee should have  made  a claim  for deduction under the said provisions to enable the Income-tax Officer to consider the same."

     High  Court rejected the argument of the Revenue  that unless  depreciation  was taken into account the  Income-tax Officer  could  not arrive at the correct taxable income  of the assessee.  This is how the High Court said:  -

     "It  is  difficult to accept this argument for,  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  of an exception that section 32(1) grants an  allowance in  respect  of  depreciation on the value  of  the  capital assets  enumerated therein.  It may appear intriguing on the part of the assessee as to why it does not claim the benefit of  deduction  from  its taxable income, but the  choice  is clearly  its.  Where the assessee does not want the benefit, it  cannot  be thrust upon it.  There is no provision  which makes it compulsory on the part of the Income-tax Officer to make  deductions in all cases.  If it were incumbent on  the Income-tax   Officer   to     make   compulsory   deductions irrespective  of  whether the assessee claimed or  not,  the statutory  requirement  of  making   the  claim  along  with necessary  particulars  and the provision for "allowing"  it would be unnecessary."

     In  Chief  CIT  (Administration)   vs.   Machine  Tool Corporation  of India Ltd.  [(1993) 201 ITR 101 (Kar.)]  the assessee  filed revised return whereby it withdrew its claim regarding  depreciation in the original return.  Income- tax Officer,  however,  allowed  depreciation   as  per  details furnished  in  the original return.  High Court noticed  the divergence  of opinion among the High Courts on the question and  also  referred  to a circular of the Central  Board  of Direct  Taxes dated September 4, 1972 to the effect that the Board will have no objection to the line of action suggested by  the assessee, as there is nothing in law to hold that it is   mandatory   for  the   assessing  authority  to   allow depreciation  even  if  the assessee  withdraws  his  claim. Court  said  there could not be any doubt that  allowing  of deductions  as  provided under Section 32 of the Act  itself was  subject  to the provisions of Section 34.   Sub-section (1)  of Section 34 requires furnishing of particulars by the assessee  in  return as a condition precedent to  claim  the deductions,  and  if he does not choose to do so it  is  not mandatory  for  the Income-tax Officer to find something  on the  record to impose that benefit upon the assessee.  Court also  held that once a revised return is filed under Section 139(5) of the Act, the original return is substituted by the revised  return and consequently the entries in the relevant claim  of the original return seeking depreciation could not be  used for any purpose.  It is, therefore, not open to the Income-tax  Officer  to  advert to the  original  return  or statement  filed  along with it for the purpose of  allowing deductions  after  such claim was expressly withdrawn  under the revised return.

     In  CIT vs.  Andhra Cotton Mills Ltd.  [(1996) 219 ITR

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404  (AP)]  for the Assessment Year 1979-80 the assessee,  a company,  filed its return of income showing a loss of  over rupees one crore.  Later, a revised return was filed showing a  loss of over rupees one crore though for a lesser  amount than  in the original return.  Income-tax Officer,  however, computed the current profit at Rs.4,32,364/- and the current depreciation  at  Rs.9,64,029/-  leading to a  net  loss  of Rs.5,31,665/-.   Contention  of the assessee was that  since there  was  carried  forward loss, if  depreciation  is  not allowed  as  the  deduction, then the carried  forward  loss could  be set off against the current profit and the current depreciation  could  be carried forward without  limitation, unlike  business  loss,  for  which there  is  a  period  of limitation  for  set  off.   That was  the  reason  why  the assessee  had filed the revised return withdrawing the claim for deduction of depreciation.  The question that ultimately came  to be referred to the High Court was "Whether, on  the facts  and in the circumstances of the case, the Income- tax Appellate  Tribunal is justified in upholding the orders  of the   Commissioner   of   Income-tax   (Appeals)   directing withdrawal  of the deduction by way of depreciation  allowed by  the  Income-tax Officer." It was the submission  of  the Revenue  that  the provisions of the statute  required  that true income should be ascertained and such income in respect of  a  business  cannot  be  properly  ascertained   without deducting  the depreciation which is the first charge on the profit.  For this support was drawn from the decision of the Supreme   Court  in  CIT  v.   Mother  India   Refrigeration Industries  P.   Ltd.  [1985] 155 ITR 711.  High Court  said that under Section 139(5) a revised return could be filed if there  was  an  omission or wrong statement.   Assessee  had prepared   a   Profit  and   Loss  Account   providing   for depreciation  but  it  did not opt for that  option  in  the normal course of its business.  High Court found that in the original  return  Profit  and Loss  Account  containing  the provision  for depreciation had been filed.  High Court  was of  the view that revised return was not a valid return  and rejected   the  contention  of   the  assessee  that   since particulars  of  depreciation were not given in the  revised return  the  Income-tax Officer could not take into  account the  particulars  of depreciation contained in the  original return.  High Court then went on to observe:

     "Moreover,  under  section 143(1)(b)(iv),  even  while making  an assessment accepting the return of the  assessee, the  Income-tax  Officer has to allow the  proper  deduction under  section 32.  Under section 143(3), an assessment made under  section  143(1)  is  deemed   to  be  incomplete   or inadequate  if  proper depreciation is not  allowed.   These provisions  also  indicate,  along  with  section  28  which requires  that the income from a business has to be computed in  accordance with the provisions of sections 29 to 44, and read  with  section  145,  that  depreciation  is  a  proper deduction  in arriving at the correct income from  business. No  doubt  section 34 provides that the deduction  shall  be allowed  only  if the prescribed particulars are  furnished. This  only ensures that correct information is available  to the  Income-tax  Officer for allowing the proper  deduction. But this cannot be construed to mean that where the assessee deliberately  withholds  the information, no  deduction  for depreciation could be given in computing the income.  In the present  case,  the motivation for the assessee to  withdraw the  claim  for deduction of depreciation is only to  get  a set-off  of the business loss of the earlier year.  But  the current depreciation is a first charge on the profit as held

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by   the  Supreme  Court  in  Mother   India   Refrigeration Industries  P.   Ltd.’s  case [1985] 155 ITR  711  and  that charge  cannot be ignored by withholding the particulars  so as to avail of the setting off the earlier year’s loss which lapses  by  the  prescribed period of  limitation.   In  our considered  opinion, therefore, the assessee cannot withdraw the  claim  for depreciation allowance when particulars  are available in accordance with section 34 only for the purpose of  setting off of the loss of the earlier years.  Since the particulars  were  available  as furnished  along  with  the original  return,  the Income-tax Officer is bound to  allow the  deduction of depreciation in computing the income  from business.  The assessment made by the Income-tax Officer, in this  case,  is, therefore, correct and in  accordance  with law."

     High Court, therefore, answered the question in favour of the Revenue and against the assessee.

     In  CIT vs.  Andhra Cotton Mills Ltd.  [(1997) 228 ITR 30  (AP)],  where  one of us (Quadri,J.) was a  member,  the assessee   questioned   the  deductions    in   respect   of depreciation allowed by the Income-tax Officer under Section 32  of the Act on the ground that it did not raise any claim for  such deductions in its return of income.  The  assessee also  did  not  furnish  the  prescribed  particulars  under Section  34(1)  of the Act.  High Court considered both  the views  one in favour and the other against the assessee  and preferred  the view favouring the assessee.  The Court  also referred  to  the circular of the Central Board  of  Revenue dated  August  31, 1965 directing 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".  The Court observed  that the  record did not disclose that any particulars  regarding depreciation  were  furnished  by the assessee or  that  the Income-tax  Officer had asked for the particulars  whereupon the  assessee furnished them.  In its view, therefore, under Section  34(1)  of the Act and the circular of  the  Central Board  of  Revenue  the Income-tax Officer  could  not  have allowed the deduction of depreciation.  High Court said:  -

     "We may also observe that, on reading sub- section (1) of  Section 34 we do not find any reference to the  assessee claiming  or  not  claiming deduction of  depreciation.   It states  that deduction in respect of depreciation "shall  be allowed  only  if  the   prescribed  particulars  have  been furnished;   .."  (emphasis* supplied).  A fair  reading  of this provision conveys that when prescribed particulars have been  furnished,  there  is  no option  but  that  the  said deductions  shall  be allowed.  The reverse may not  follow: that  means, the assessing authority even then may allow the deduction  in  respect of depreciation, but before  he  does that he has to require the assessee to furnish the requisite particulars   for  computing   the  depreciation  allowance. Sub-section  (9)  of section 139, introduced by the  Finance (No.   2)  Act,  1980, with effect from September  1,  1980, allows  the Income-tax Officer to give an opportunity to the assessee  to  rectify the return, if he found it  defective, and,  if  within the period allowed the assessee  failed  to rectify  the  return,  "the return shall be  treated  as  an invalid return"."

     In  the  case of Commissioner of Income-Tax vs.   J.K.

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Industries  Ltd.  [(2000) 241 ITR 537 (Cal.)] the Court held that  neither  the  assessee has  claimed  the  depreciation allowance  nor he had furnished the required particulars for deduction on account of depreciation allowance nor there was material  on record before the Income-tax Officer, which was necessary to consider the depreciation allowance, Income-tax Officer  was  not justified in allowing the depreciation  to the assessee.

     In  the  case  of  Ascharajlal Ram  Prakash  vs.   CIT [(1973)  90  ITR 477 (All.)] the issue before the Court  was that  though  the  assessee  had  not  claimed  depreciation whether the Income-tax Officer could allow the depreciation. High  Court  took  the  view that if during  the  course  of assessment  proceedings the Income-tax Officer came to  know the relevant particulars necessary for grant of depreciation he  was bound to give effect to that and allow depreciation. This is how the High Court considered the matter:  -

     "Section  32 of the Act provides that depreciation  in respect  of buildings, machinery, plant and furniture  owned by  the assessee and used for the purpose of his business or profession  shall  be allowed subject to the  provisions  of section  34.   Section  34 provides  that  deductions  under section  32 on account of depreciation shall be allowed only if  the prescribed particulars have been furnished.  In what form  the  prescribed particulars must be furnished,  or  in what  document, is not mentioned in section 34.  There is no requirement  in that section that the prescribed particulars must  be  furnished in any particular document.  Rule 12  of the  Income-tax  Rules  provides for the form in  which  the return  of income must be furnished.  In the form of  return there  is a section which refers to the various  particulars required  under  section  34(1)  when a claim  is  made  for depreciation.   Now,  merely because the form of the  return provides for a place where the statement of such particulars should  be set out does not mean that in the absence of such statement  the Income-tax Officer has no power to allow  the depreciation.   A  deduction  by   way  of  depreciation  is necessary in order to arrive at the true profits or gains of the business or profession.  The Income-tax Officer is bound to  arrive at the true figure of such profits and gains  and if  in the course of assessment proceedings he comes to know of  the  relevant  particulars necessary for  the  grant  of deduction,  he  is bound to give effect to it.  There is  no dispute that during the course of the assessment proceedings in  this  case the Income-tax Officer did come to  know  the date on which the truck was purchased, and the original cost of  the truck, and from that along with the rate  prescribed by  the  rules  for  allowing depreciation,  he  could  have computed  and  allowed depreciation.  We are  not  satisfied that  merely because the assessee did not file the necessary particulars  in  the  return filed by  him,  the  Income-tax Officer did not have the jurisdiction to grant the allowance by way of depreciation."

     In Dasa-prakash Bottling Co.  vs.  CIT [(1980) 122 ITR 9  (Mad.)]  the Madras High Court considered the  fact  that though the figures had not been furnished in return as such, but  the  figures were furnished by the assessee during  the course  of  assessment under protest.  High Court  took  the view  that  once the details and particulars  required  were furnished by the assessee whether furnished under protest or not  did  not make any difference and depreciation could  be

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allowed.

     In  CIT  vs.   Southern   Petro  Chemical   Industries Corporation  Ltd.  [(1998) 233 ITR 400 (Mad.)] following its earlier decision in Dasaprakash Bottling case the Court held that the grant of depreciation was a statutory allowance and even  if the assessee had not furnished the particulars,  it was open to the Income-tax Officer to grant the depreciation and  that  it would not be perfectly open to the  Income-tax Officer  to  disallow  the  claim if the  assessee  had  not furnished  the particulars.  On the other question where the assessee  in  the revised return had withdrawn his claim  of depreciation  the  Court  said that where the  assessee  had furnished   the   particulars  regarding    the   claim   of depreciation  in the original return the assessee would  not be  able  to withdraw his claim for depreciation as in  that case revised return would not be valid within the meaning of Section  139(5) of the Act.  High Court said that in that it could  not  be  said that the assessee  had  discovered  any omission  or  wrong statement in the original return.   Even otherwise  it  was not open to the assessee to withdraw  the particulars  regarding  grant  of depreciation by  filing  a revised return.  This is how the Court said:  -

     "Even  that  apart,  the assessee  had  furnished  the particulars  regarding  the  claim of  depreciation  in  the original  return  and  a revised return was filed.   In  our opinion,  the revised return is not a revised return  within the  meaning  of section 139(5) of the Act as it  cannot  be stated  that  the  assessee had discovered any  omission  or wrong  statement in the original return filed.  We hold that it  is not open to the assessee to deliberately withdraw the claim  for depreciation and such a deliberate withdrawal  of the  claim  can  neither  be regarded  as  an  omission  nor furnishing  a  wrong statement in the original  return.   It cannot,  therefore,  be stated that the revised  return  has taken  the  place of the original return.  That apart,  even assuming  that the assessee withdrew the original return  by filing  a revised return, it is not open to the assessee  to withdraw the particulars regarding the grant of depreciation by filing a revised return.  The particulars had found their way  and  reached the records of the Income-tax Officer  and once  they  become a part of the records of  the  Income-tax Officer,  it  is  not  open to the assessee  to  direct  the Income-tax  Officer  to  close his eyes to  the  particulars available  in his files.  When the particulars regarding the grant  of depreciation were available, the decision of  this Court  in  Dasaprakash Bottling Co.’s case [1980] 122 ITR  9 would  apply.   As seen earlier, section 34 of the Act  does not  require that the particulars should be furnished  along with  the return.  Therefore, once the particulars regarding the  grant of depreciation are available, it is open to  the Income-tax  Officer  to  grant  depreciation,  even  if  the assessee had withdrawn the claim in the revised return."

     In  Hopeville Estate vs.  State of Tamil Nadu  [(1978) 112  ITR 861 (Mad.)] High Court struck somewhat a  different note.   It  was  a case under the  Tamil  Nadu  Agricultural Income-tax Act, 1955.  The assessee had claimed depreciation on  the value of the tank said to have been constructed  for the   use  of  the  workers,  in  the  computation  of   the agricultural  income.   This claim was rejected by  all  the authorities on the ground that the depreciation could not be allowed  as  per the Income-tax Act, 1961 as no  particulars

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necessary  to  claim depreciation had been furnished.   High Court  rejected the contention of the assessee by making the following observations :

     "Even  if the authorities have loosely referred to the applicability of the provisions of the Income-tax Act, still we are of the opinion that the petitioner is not entitled to succeed  with  regard  to the facts of this  case.   We  are assuming  for  the  purpose  of   this  argument  that   the contention of the learned counsel that building includes all structures  constructed with a view to provide amenities  to workers  as  defined in the Plantation Labour Act, 1951,  as contained  in  the Explanation to section 5(f) of the  Tamil Nadu  Agricultural  Income-tax Act, is correct.   Still  the petitioner  will  have  to establish with reference  to  the provisions  contained  in  the Income-tax Act, the  rate  of depreciation  to which it is entitled, because rule 4(1)  of the  Tamil Nadu Agricultural Income-tax Rules, 1955,  refers to   the  rates  prescribed  in   the  Income-tax  Act   for calculating  the rate of depreciation to be arrived at under section  5(f) of the Tamil Nadu Agricultural Income-tax Act, 1955.  Under rule 5 of the Income-tax Rules, 1962, read with Appendix  I  thereto,  buildings are  classified  into  four categories and in respect of the first three categories only the rate of depreciation has been prescribed.  Consequently, before claiming depreciation under section 5(f) of the Tamil Nadu  Agricultural  Income-tax  Act,   the  petitioner  must furnish  the  necessary  particulars in order to  claim  the particular  rate  of  depreciation as provided  for  in  the Income-tax  Rules.  No such claim whatever has been made  in the  present case, and the only contention that has been put forward  was a general one that the tank is a building, and, therefore,  a  depreciable  asset.   As a  matter  of  fact, section  5(f) itself expressly states that the  depreciation will  be  deducted  only  when the  assessee  furnishes  the prescribed  particulars.  In this case, no such  particulars have  been  furnished by the petitioner.  In view  of  these circumstances, it is not necessary to consider and deal with any  general  question, and with reference to the  facts  of this  case  for  the year in question the Tribunal  and  the authorities below were right in holding that no depreciation could be deducted in computing the agricultural income."

     In  CIT  vs.   Gujarat State  Warehousing  Corporation [(1976)  104 ITR 1 (Guj.)] the question before the Court was regarding  priorities  adjustment  as  between  the  current depreciation,  carried  forward   depreciation  and  carried forward losses against the profits and gains of business for the  current  year  in view of the provisions  contained  in Sections  32(2)  and 72(2) of the Act.  For  the  Assessment Year  1967-68  Gujarat  State Warehousing  Corporation,  the assessee,  made a business profit of Rs.2,18,488/-.   Before this  Assessment Year assessee had suffered business  losses of  Rs.2,43,339/- which were carried forward from the  years 1964-65, 1965-66 and 1966-67.  Assessee also carried forward unabsorbed  depreciation for all these three previous  years amounting  to  Rs.46,696/-.   For the current  year  1967-68 there  was  current  depreciation of  Rs.27,047/-.   As  the assessee  earned  business profit of  Rs.2,18,488/-  without deducting  the current depreciation the question which arose during  the  course  of assessment proceedings  was  whether carried  forward business loss of Rs.2,43,339/- should first be  deducted  from the business profit or whether  from  the said  profit  the  current   depreciation  should  first  be

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deducted  and thereafter the carried forward loss should  be deducted.  For the Assessment Year 1967-68 assessee had also income  of  Rs.48,105/- from other sources.  The  Income-tax Officer   first  deducted  the   current   depreciation   of Rs.27,047/-  from the profit of Rs.2,18,488.  This gave  the balance  of Rs.1,81,041/-.  From this the Income-tax Officer deducted  the  carried  forward loss of  Rs.2,43,339/-  thus resulting  in the carried forward balance of Rs.61,898/-  as business  loss.   So far as carried forward depreciation  of Rs.46,696/- was concerned the Income-tax Officer deducted it from the income from other sources which gave the net profit from  other  sources at Rs.1,409/-.  The net result of  this assessment  was that while the carried forward  depreciation as  well as current depreciation were absorbed the  business loss  of  Rs.61,898/-  was  carried   forward  to  the  next Assessment  Year  1968-69.   According to the  assessee  the method  adopted by the Income-tax Officer in giving priority to the adjustment of the current depreciation over the carry forward  loss  of  Rs.2,43,339/- was not  correct  and  that carried  forward  loss should have first been deducted  from the  business  profit  of Rs.2,18,488/-.   Assessee  further contended  that  carry forward depreciation  of  Rs.46,696/- should  have  been clubbed with the current depreciation  of Rs.27,047/- and should have been adjusted against the amount of  Rs.48,105/-  which  was the income from  other  sources. That  would  have  enabled  the assessee  to  carry  forward depreciation of the amount of Rs.25,638/- and also the carry forward loss of Rs.24,851/- for the Assessment Year 1968-69. The Appellate Assistant Commissioner dismissed the appeal of the  assessee.   It then approached the Appellate  Tribunal. The  Tribunal considered the provisions of sub- section  (2) of  Section  32,  which contains the  deeming  fiction  that carried  forward  depreciation should be treated as  current year’s  depreciation  by clubbing the same with the  current year’s  depreciation.   The  Tribunal  relied  upon  certain observations of this Court in Commissioner of Income Tax vs. Jaipuria China Clay Mines (P) Ltd.  [(1996) 59 ITR 555 (SC)] and  held  that the lower authorities were not justified  in not giving priority to the adjustment of the carried forward loss  as  against  current year’s depreciation  in  view  of sub-section  (2)  of  Section  72  of  the  Act.   Tribunal, therefore, allowed the appeal of the assessee.  It held that against  the income of Rs.2,18,488/- for the Assessment Year 1967-68 first the carried forward loss of early years should be   deducted  and  thereafter   current  depreciation   and unabsorbed  depreciation of early years should be  deducted. Sub-section  (2)  of  Section  72  provides  that  where  an allowance  or  part  thereof is, under  sub-section  (2)  of Section  32 or sub-section (4) of Section 34, to be  carried forward,  effect  shall first be given to the provisions  of this Section.  Section 72 provides for carry forward and set off  business losses.  Revenue thereafter took the matter to the  High  Court in reference.  High Court was of  the  view that the observations of the Supreme Court in Jaipuria China Clay  Mines case "make it clear that the taxable profits  or gains  from  a  particular business  cannot  be  ascertained without  debiting  the  current year’s depreciation  to  the profits  and  gains" It further said that the Supreme  Court had  held  that current year’s depreciation was  always  the first  charge  on the profit earned in the business  in  the current  year.   High  Court finally  observed:-  "One  more reason  which impels us to take the view which we have taken is  that  carried forward depreciation cannot be put at  par with  current  year’s depreciation for all purposes  because carried   forward  depreciation  is   made  up  of   current

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depreciation  of  respective previous years and as such  its components had the chance of being set off partially against the income of the relevant previous years.  These components were  carried  forward only because they could not be  fully set  off against the income of those relevant years.   Under the  circumstances,  it stands to reason that while  working out  the  provisions  of sub-section (2) of section  72  the carried  forward  depreciation cannot stand at par with  the current  year’s  depreciation, which like the components  of the  carried  forward  depreciation must get the  chance  of being first set off against the current year’s income."

     High  Court,  therefore,  answered  the  reference  in favour of the Revenue and against the assessee.

     We  do  not  think Gujarat High Court in the  case  of Gujarat  State Warehousing Corporation [104 ITR 1] has taken correct  view  in  respect of the issues with which  we  are concerned  in  the  present  appeal.   High  Court  has  not properly  appreciated  the context in which this Court  made observations  in  the case of Jaipuria China Clay Mines  (P) Ltd.  [59 ITR 555] on which High Court has relied.  In later two  cases  of Chokshi Metal Refinery [107 ITR 63] and  Arun Textiles  "C"  [192 ITR 700] Gujarat High Court  has  itself taken,  if  we may say so, a different view falling in  line with  the  views of Bombay, Punjab and  Haryana,  Karnataka, Andhra  Pradesh, Calcutta and Kerala High Courts which  view commends  to  us.  Language of the provision of Sections  32 and  34 are specific and admits of no ambiguity.  Section 32 allows  depreciation as deduction subject to the  provisions of  Section  34.  Section 34 provides that  deduction  under Section  32 shall be allowed only if prescribed  particulars have  been  furnished.  We have seen Rule 5AA of  the  Rules which  though  since  deleted provided for  the  particulars required  for  the  purpose of deduction under  Section  32. Even in the absence of Rule 5AA return of income in the form prescribed  itself  requires particulars to be furnished  if the  assessee  claims depreciation.  These  particulars  are required  to  be  furnished  in great detail.   There  is  a circular  of the Board dated August 31, 1965, which provides that  depreciation  could not be allowed where the  required particulars  have not been furnished by the assessee and  no claim  for  the  depreciation has been made in  the  return. Income-tax Officer in such a case is required to compute the income without allowing depreciation allowance.  Circular of the Board dated April 11, 1955 is of no help to the Revenue. It  imposes merely a duty on the officers of the  department to   assist   the  tax-payers  in  every   reasonable   way, particularly, in the matter of claiming and securing relief. The  Officer  is required to do no more than to  advise  the assessee.   It  does  not place any mandatory  duty  on  the officer  to allow depreciation if the assessee does not want to  claim  that.   Provision for claim  of  depreciation  is certainly  for the benefit of the assessee.  If it does  not wish  to avail that benefit for some reason, benefit  cannot be  forced  upon him.  It is for the assessee to see if  the claim   of  depreciation  is  to  his   advantage.    Rather Income-tax   Officer   should  advise   him  not  to   claim depreciation  if that course is beneficial to the  assessee. That  would be in our view the spirit of the circular  dated April 11, 1955.  Income under the head "profits and gains of business  or  profession" is chargeable to income-tax  under Section  28  and  that  income under Section  29  is  to  be computed  in  accordance  with the provisions  contained  in

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Sections  30  to  43A.  The argument that since  Section  32 provides  for depreciation it has to be allowed in computing the  income  of the assessee cannot in all circumstances  be accepted  in  view of the bar contained in Section  34.   If Section  34  is  not  satisfied   and  particulars  are  not furnished  by the assessee his claim for depreciation  under Section 32 cannot be allowed.  Section 29 is thus to be read with reference to other provisions of the Act.  It is not in itself a complete code.

     In Ascharajlal Ram Prakash case [90 ITR 477] Allahabad High Court said that since it is not mentioned in Section 34 as   to  in  what  form   the  prescribed   particulars   of depreciation must be furnished and that, therefore, there is no  requirement  in  that Section that particulars  must  be furnished.   High  Court further went on to say that  merely because  the  form of return provides for a place where  the statement  of such particulars should be set out, would  not mean  that  in  absence  of such  statement  the  Income-tax Officer  has  no power to allow the depreciation.   This  is contrary  to the mandate of Section 34 as well as the  Board circular  dated August 31, 1965.  Madras High Court in  Dasa Prakash  Bottling Co.  case [122 ITR 9] following  Allahabad High  Court in the case of Ascharajlal Ram Prakash said that Income-tax Officer can disallow the claim of depreciation if the assessee did not furnish the prescribed particulars.  It further  went  on  to  hold that it would  be  open  to  the Income-tax  Officer  to  grant   depreciation  even  if  the assessee  had not furnished the prescribed particulars.   In this case the assessee did not give the particulars relating to  depreciation  in  the  return  form  nor  did  it  claim depreciation.   On  being  called  upon  by  the  Income-tax Officer  to  furnish necessary particulars the  assessee  in response  thereto  furnished the particulars under  protest. On   that   basis  the   Income-tax  Officer   granted   the depreciation.   We do not think that the views expressed  by the  Madras High Court lay down correct law.  Section 34  is not  in the nature of merely an enabling provision.  In  the absence  of  particulars  of  depreciation  as  required  by Section  34,  there is no mandate on the Income-tax  Officer under  Section  29  to  compute   the  income  by   allowing depreciation  under  Section 32.  In the second Madras  case (CIT  vs.   Southern Petro Chemicals Industries  Corporation Ltd.   [233 ITR 400] the assessee did claim depreciation but he  withdrew the same in the revised return.  On that  basis it  was  held  that  since the assessee  had  furnished  the particulars  regarding  the  claim of  depreciation  in  the original  return the assessee would not be able to  withdraw his claim for depreciation.  It would appear that High Court proceeded  on  the basis that the revised return was  not  a valid  return  under Section 139(5) of the Act.  High  Court followed  its earlier decision in Dasa Prakash Bottling  Co. To  us  it  appears that if the revised return  is  a  valid return  and  the  assessee  has   withdrawn  the  claim   of depreciation  it  cannot be granted relying on the  original return when the assessment is based on the revised return.

     We get support from the earlier decision of this Court in  Dharampur  Leather  Co.   Ltd.    case  [60  ITR   165]. Allowance  of depreciation is calculated on the written down value  of the assets, which written down value would be  the actual  cost  of  acquisition  less  the  aggregate  of  all deductions  "actually allowed" to the assessee for the  past years.   "Actually  allowed"  does   not  mean   ’notionally allowed’.   If  the  assessee has not claimed  deduction  of

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depreciation  in any past year it cannot be said that it was notionally  allowed to him.  A thing is "allowed" when it is claimed.   A subtle distinction is there when we examine the language  used in Section 16 and that Sections 34 and 37  of the Act.  It is rightly said that a privilege cannot be to a disadvantage and an option cannot become an obligation.

     We  thus uphold the views expressed by the High Courts of  Bombay,  Punjab and Haryana, Karnataka, Andhra  Pradesh, Calcutta  and Kerala.  Accordingly the appeal is  dismissed. We  answer  the  question set out in the beginning  of  this judgment   in   affirmative,   i.e.,  in   favour   of   the respondent-assessee and against the Revenue.  There shall be no order as to costs.

     We  record our appreciation to the assistance rendered by  Mr.   Soli  Dastur, who appeared amicus  curiae  on  our request.   He  made  splendid  presentation of  law  on  the subject.