S. Parvatha Rao, J.:— This is a reference made at the instance of the Revenue under sub-section (1) of section 256 of the Income-Tax Act, 1961 (for short “the Act”). The question referred for our opinion arises out of a common order of the Income-Tax Appellate Tribunal in I.T.A Nos. 21 and 22 (Hyd.) of 1984 dated October 5, 1984, relating to the assessment years 1980-81 and 1981-82 and is as follows:
“Whether, on the facts and in the circumstances of the case, the 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?”
2. As there was no representation on behalf of the respondent-assessee, we requested Mr. A.V Krishna Kaundinya to act as amicus curiae.
3. This is an odd case where the assessee questions the deductions in respect of depreciation allowed by the Income-Tax Officer under section 32 of the Act for the two assessment years 1980-81 and 1981-82 on the ground that it did not raise any claim for such deductions in its returns for those two years. That it did not claim any such deductions in respect of depreciation under sub-section (1) of section 32 of the Act for those two years is not in dispute. It is also not in dispute that it did not furnish the prescribed particulars under sub-section (1) of section 34 of the Act. However, it claimed deductions under section 80J of the Act and also investment allowance. In the assessment orders under sub-section (3) of section 143 of the Act dated October 25, 1982, and December 16, 1982, in respect of the assessment years 1980-81 and 1981-82, respectively, the Income-Tax Officer allowed admissible depreciation of Rs. 10,22,128 and Rs. 11,01,158 for the two assessment years, respectively, observing that the assessee had not claimed depreciation allowance in the profit and loss statement and, on the other hand, it had claimed deduction of section 80J and investment allowance to be set off before deduction of admissible depreciation, and holding that depreciation under section 32(1) stood in priority for deduction before allowance of relief under section 80J as well as investment allowance and that, therefore, while computing the total income of the assessee for each of the assessment years, admissible depreciation should be first deducted before an adjustment of investment allowance and section 80J claim. The assessee appealed to the Commissioner of Income-Tax (Appeals). The Commissioner accepted the contention of the assessee that when it specifically declined to have the depreciation allowance in any particular assessment year, it was not open to the Income-Tax Officer to compulsorily press the relief against the assessee's will and directed the Income-Tax Officer to withdraw the depreciation allowance given by him in computing the assessee's total income to the extent it pertained to the current depreciation for each of the two assessment years. The Revenue appealed to the Tribunal. On behalf of the Revenue, it was contended before the Tribunal that if the current depreciation was not granted, it would not be possible to ascertain the income of the assessee at all and that arriving at business income without adjustment of the current depreciation from the gross income would be contrary to the principles laid down by a Division Bench of this court in Addl. CIT v. Andhra Printers Ltd. [1979] 117 ITR 555. This contention was not accepted by the Tribunal and relying on the decision of a Division Bench of the Punjab and Haryana High Court in Beco Engineering Co. Ltd. v. Commissioner Of Income-Tax, Rohtak. [1984] 148 ITR 478, it dismissed the appeals by its common order dated October 5, 1984, referred to earlier.
4. Before us, on behalf of the Revenue, Mr. Habeeb Ansari, relies on the decisions of the Allahabad High Court in Ascharajlal Ram Parkash v. Commissioner Of Income-Tax, U.P [1973] 90 ITR 477 and of the Madras High Court in Dasaprakash Bottling Co. v. Commissioner Of Income-Tax, Madras. [1980] 122 ITR 9, which directly support the Revenue and also on the decision of the Supreme Court in CIT v. Mother India Refrigeration Industries P. Ltd. [1985] 155 ITR 711 upholding the view of this court in Andhra Printers Ltd.'s case [1979] 117 ITR 555. He contends that the provisions of section 32 and section 34 have to be interpreted in consonance with the decision of the Supreme Court in Mother India Refrigeration Industries P. Ltd.'s case [1985] 155 ITR 711 holding that the normal accountancy principle has to be applied in arriving at the net income from business for that year by debiting the current year's depreciation and that this is a basic and well recognised principle of commercial accountancy and that this principle cannot be deviated from unless a clear intention to the contra is manifested by the provisions of the Act. He also draws our attention to a decision of a Division Bench of this court dated March 7, 1994, in R.C No. 58 of 1986 (CIT v. Andhra Cotton Mills Ltd. [1996] 219 ITR 404) relating to the same assessee, i.e, the respondent herein in respect of the assessment year 1979-80, and relies on the observations thereunder as follows (page 407):
“But the current depreciation is a first charge on the profit as held by the Supreme Court in Mother India Refrigeration Industries P. Ltd.'s case [1985] 155 ITR 711 and that the charge cannot be ignored by withholding the particulars so as to avail of the setting off of the earlier year's loss which lapses by the prescribed period of limitation.”
5. Mr. Krishna Kaundinya placed before us the contrary views strongly expressed by the Division Benches of the Gujarat High Court in Chokshi Metal Refinery v. CIT [1977] 107 ITR 63 and CIT v. Arun Textile “C” [1991] 192 ITR 700, of the Bombay High Court in CIT v. Someshwar Sahakari Sakhar Karkhana Ltd. [1989] 117 ITR 443, of the Punjab and Haryana High Court in Beco Engineering Co. Ltd.'s case [1984] 148 ITR 478 and in CAT v. Friends Corporation [1989] 180 ITR 334, and of the Karnataka High Court in Chief Commissioner Of Income-Tax v. Machine Tool Corporation* [1993] 201 ITR 101.
6. R.C No. 58 of 1986 (CIT v. Andhra Cotton Mills Ltd. [1996] 219 ITR 404 (AP)), is a case where the assessee had filed a return for the assessment year 1979-80 claiming deduction of depreciation and subsequently filed a revised return withdrawing the claim for deduction of depreciation. The contention of the assessee in that case was that when a revised return was filed the original return got substituted, and, therefore, the Income-Tax Officer should not have relied on the original return. That argument did not appeal to the Bench of this court which decided that case. The Bench observed that under section 139(5) of the Act a revised return could be filed, if there was an omission or wrong statement, and that the assessee did in fact prepare a profit and loss account providing for depreciation, and that in the original return the profit and loss account containing the provision for depreciation had been filed, and that under the circumstances, it could not be said that there was any wrong statement in the original return which could enable the assessee to file a revised return under section 139(5) of the Act, and that, therefore, the revised return was not a valid return for being processed by the Income-Tax Officer. It was under those circumstances, the Bench held, on the basis of the original return, that was not a case where the assessee did not claim deduction of depreciation and where the particulars of depreciation were not given. On those findings, therefore, the assessee could not rely on sub-section (1) of section 34 of the Act as in force at the relevant time which, provided that “the deductions referred to in sub-section (1) or sub-section (1A) of section 32 shall be allowed only if the prescribed particulars have been furnished…”. It is in that context that the Bench observed that (page 407) “no doubt, section 34 provides that the deduction shall be allowed only if the prescribed particulars are furnished… 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”. Those observations were not really necessary for arriving at a decision in that case, because the Bench already held that the revised return was not a valid return, and that in the original return the assessee did claim deduction for depreciation and particulars were available because the profit and loss account providing for depreciation was filed along with the original return. We, therefore, find that those observations were only “obiter dicta”. We may also observe that the Bench did not notice the circular of the Central Board of Revenue dated August 31, 1965, which 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”.
7. In the present case, admittedly, the assessee did not claim deduction of depreciation. The record does not disclose that any particulars in that regard were furnished by the assessee or that the Income-Tax Officer asked for the particulars, whereupon the assessee furnished them as in Dasaprakash Bottling Co.'s case [1980] 122 ITR 9 (Mad). Therefore, in view of sub-section (1) of section 34 and the circular of the Central Board of Revenue, the Income-Tax Officer could not have allowed the deduction of depreciation.
8. 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.” As already stated by us earlier, the record does not disclose whether the Income-Tax Officer sought any information from the assessee as regards the particulars necessary in respect of depreciation allowance. Therefore, on the facts of the present case, we are not inclined to hold that the Appellate Tribunal was not justified in upholding the order of the Commissioner of Income-Tax (Appeals) directing the withdrawal of deduction by way of depreciation allowed by the Income-Tax Officer.
9. Dasaprakash Bottling Co. [1980] 122 ITR 9 (Mad) is a case where the assessee did not fill up the particulars relating to depreciation in the return form and did not claim any depreciation allowance and the profit and loss account also did not contain any deduction for depreciation. The Income-Tax Officer issued a notice calling upon the assessee to explain why depreciation was not claimed and why prescribed particulars were not furnished, and also holding out that, if the assessee failed to furnish the required information, there would be an ex parte assessment. Thereupon, the assessee furnished particulars relating to depreciation under protest. Thus, that was not a case where the prescribed particulars were not furnished. Therefore, when the prescribed particulars had been furnished, the Income-Tax Officer shall allow the depreciation allowance as per section 34(1) of the Act. The facts of that case are very different from the facts of the present case.
10. In Ascharajlal Ram Parhash's case [1973] 90 ITR 477, a Division Bench of the Allahabad High Court held that there was no requirement in section 34 of the Act that the prescribed particulars must be furnished in a particular document, and that merely because the form of the return provided for a place where the statement of such particulars should be set out, it did not mean that in the absence of such statement, the Income-Tax Officer had no power to allow depreciation, if, in the course of assessment proceedings, he came to know of the relevant particulars necessary for the grant of deduction. In that case, the court observed that there was no dispute that during the course of the assessment proceedings, the Income-Tax Officer did come to know the relevant particulars. The depreciation allowed in that case related to a truck purchased by the assessee for the purpose of its business. The Income-Tax Officer came to know the date on which the truck was purchased and the original cost of the truck, and on that basis he computed and allowed depreciation.
11. It is not necessary for us to go deeper, because in the present case we find that in the returns for the two assessment years the assessee did not claim depreciation allowance and did not give any particulars in that regard, and the statement of case does not disclose that the Income-Tax Officer sought any particulars for the same. It is an admitted fact that the assessee had not shown depreciation in its profit and loss account statement filed along with the returns for the two years.
12. Beco Engineering Co. Ltd. [1984] 148 ITR 478 (P&H) is a case where the assessee-company in its original returns claimed depreciation and later it filed revised returns in which it withdrew the claim for depreciation claimed in the original returns. The Punjab and Haryana High Court observed that it was well settled that in case the assessee filed revised returns, they were to be taken into consideration for the purpose of making an assessment, and that the original returns could not be adverted to for that purpose. On that basis, that court held that as in the revised returns the assessee did not claim any depreciation allowance, and as the circular of the Central Board of Revenue dated August 31, 1965, provided that where the required particulars had not been furnished by the assessee and no claim for depreciation had been made in the return the Income-Tax Officer should estimate the income without allowing the depreciation allowance, the Income-Tax Officer could not give the allowance of depreciation to the assessee.
13. Someshwar Sahakari Sakhar Karkhana Ltd. [1989] 177 ITR 443 (Bom) is also a case where the assessee filed a return claiming depreciation in the first instance and then filed a revised return enclosing a covering letter which stated that the depreciation claimed in the original return was withdrawn. A Division Bench of the Bombay High Court had taken the view that the assessee had a choice in the matter of claiming deduction on account of depreciation. The Bombay High Court did not agree with the view taken by the Madras High Court in Dasaprakash Bottling Co. [1989] 122 ITR 9. The Bombay High Court agreed with the view taken by the Punjab and Haryana High Court in Beco Engineering Co. Ltd. [1984] 148 ITR 478. Finally, the Bombay High Court held that the assessee had a choice to claim or not to claim depreciation allowance, and if the assessee chose not to claim it, the Income-Tax Officer was not entitled to allow a deduction on account of depreciation. A similar view was taken by the Punjab and Haryana High Court in Friends Corporation's case [1989] 180 ITR 334, holding that the allowance for depreciation was a benefit available to the assessee to claim but not one that could be thrust upon him against his wishes. Having said so, the court then observed that in order to claim depreciation, the assessee must furnish the requisite particulars as prescribed by the Income-Tax Act and the Rules made thereunder; and in the absence of such particulars the assessee could not avail of, nor, indeed, could he be entitled to depreciation. It referred to its earlier decision in Beco Engineering Co. Ltd. [1984] 148 ITR 478 (P&H) and further observed as follows (page 335 of 180 ITR):
“The proposition of law that the assessee must furnish particulars for claiming depreciation allowance is also supported by Muthukaruppan Chettiar (Pr. Al. M.) v. CIT [1939] 7 ITR 76 (Mad) and Rao Bahadur S. Ramanatha Reddiar v. CIT [1928] 3 ITC 10 (Rang.).
As mentioned earlier, 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.”
14. It is not necessary for us to go this far for the purpose of the present case.
15. Arun Textile “C” [1991] 192 ITR 700 (Guj) is also a case where the assessee claimed depreciation in the original return, but withdrew the claim of depreciation in its revised return. The Gujarat High Court disagreed with the Allahabad High Court and the Madras High Court, and agreed with the view taken by the Punjab and Haryana and the Bombay High Courts. To the same effect is the decision of the Karnataka High Court in Machine Tool Corporation of India Ltd. [1993] 201 ITR 101, which is also a case where revised returns were filed withdrawing the original claim regarding depreciation.
16. We may observe that sub-section (1) of section 34 was omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1988, with effect from April 1; 1988.
17. In the result, the reference is answered against the Revenue and in favour of the assessee. No costs. We thank Mr. A.V Krishna Kaundinya for his assistance.