JUDGMENT
N.V. Balasubramanian, J.
1. It is a reference at the instance of the Revenue relating to the assessment of income of the assessee for the assessment year 1978-79 and the following questions of law have been referred to us for our consideration :
“1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the revised return filed by the assessee was valid under Section 139(5) of the Income-tax Act ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that after the filing of the revised return, it was not open to the Income-tax Officer to look into the particulars of depreciation furnished with the original return for allowing the admissible depreciation ?
3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in not following the Madras High Court’s decision in the case of Dasaprakash Bottling Co. v. CIT [1980] 122 ITR 9 which specifically held that it was open to the Income-tax Officer to grant depreciation even if the prescribed particulars were not furnished ?
4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that in order to preserve and conform to all the priorities, the Department could not foist upon the assessee a claim declined by the assessee-company ?
5. Whether, on the facts and in the circumstances of the case and having regard to the context in which the Board’s Circular No. 29-D(XIX-14)
of 1965 dated August 31, 1965, was issued, the Appellate Tribunal was right in holding that the said circular was applicable to the facts of the assessee’s case -and was binding on the Income-tax Officer ?
6. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that depreciation was admissible on expenditure capitalised during the previous year relevant to the assessment year 1976-77 ?
7. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that depreciation was admissible on roads forming part of the assessee’s factory ?
8. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that depreciation on laboratory equipment was admissible at 15 per cent, and not at 10 per cent. ?”
2. The assessee is a company engaged in the manufacture of urea. The assessee filed its return of income for the assessment year 1978-79 on December 14, 1978, disclosing a business loss of Rs. 26,38,48,778 which included the current year’s depreciation of Rs. 9,63,65,559. The assessee subsequently filed a revised return on December 11, 1980, admitting a loss of Rs. 16,74,83,219 wherein the assessee withdrew its current year’s depreciation claimed in the original return with a view to secure the benefit of set off of the unabsorbed development rebate which would have otherwise lapsed as time barred. The Income-tax Officer, while completing the assessment, held that the return filed by the assessee on December 11, 1980, was not a revised return and was not valid under Section 139(5) of the Income-tax Act, 1961 {hereinafter to be referred to as “the Act”), as the assessee could not be said to have committed any omission or made any wrong statement while furnishing the details for the claim of depreciation in the original return. The Income-tax Officer following the decision of this court in the case of Dasaprakash Bottling Co. v. CIT [1980] 122 ITR 9, granted depreciation for the assessment year in question taking into account the details furnished along with the original return. The Income-tax Officer also disallowed the claims of the assessee towards depreciation on roads, depreciation on laboratory equipment at 15 per cent, and depreciation on expenditure treated as capital in the assessment order for the assessment year 1976-77. The Income-tax Officer held that as regards depreciation on laboratory equipment, the admissible rate was only 10 per cent.
3. The assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) upheld the contention urged on behalf of the assessee and held that no depreciation was admissible for the current year as the assessee has not furnished particulars along with the revised’ return and with reference to
other items also, viz., depreciation on roads, depreciation on laboratory equipment at 15 per cent, and depreciation on capital expenditure, he accepted the contention raised on behalf of the assessee and directed the Income-tax Officer to grant reliefs as prayed for.
4. The Revenue carried the matter in appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal held that the revised return was a valid return within the meaning of Section 139(5) of the Act and since the revised return did not contain particulars, the Income-tax Officer could not have granted the depreciation and no depreciation would be allowed. The Tribunal relied upon a circular of the Board No. 29D dated August 31, 1965, and held that the decision of this court in Dasaprakash Bottling Co.’s case [1980] 122 ITR 9, is distinguishable as in that case particulars were furnished but in the instant case, there were no particulars before the Income-tax Officer to grant depreciation. According to the Tribunal, the revised return was filed to substitute the original return, and the original return must be deemed to have been withdrawn. The Tribunal held that it is not open to the Income-tax Officer to look into the particulars filed along with the original return. The Tribunal also found that the assessee had explained reasons for filing the revised return that the assessee desired to have the benefits of unabsorbed carry forward of development rebate, unabsorbed investment allowance and unabsorbed Section 80J deficiencies, which would not be available if the current year depreciation was granted. The Tribunal has taken into consideration the above factors and found that the Income-tax Officer was not correct in granting the current year’s depreciation and the Tribunal also held that by not granting the current year’s depreciation, the priority fixed by the Income tax Act for the allowance of depreciation and other allowances would not in any way, be disturbed. The Tribunal placed reliance on a circular of the Board and held that unless the required particulars were furnished by the assessee, the Income-tax Officer should estimate the income without allowing depreciation. The Tribunal, therefore, held that the grant of depreciation was not in accordance with law. As regards other items, the Tribunal held that the assessee was entitled to claim depreciation on roads, depreciation on laboratory equipment at 15 per cent, as against 10 per cent, granted by the Income-tax Officer and also depreciation on capital expenditure. This order of the Appellate Tribunal is the subject-matter of the present tax case reference and the Tribunal has stated a case on the questions of law set out earlier.
5. We are of the view that the decision of this court in Dasaprakash Bottling Co. v. CIT [1980] 122 ITR 9, would squarely apply to the facts of the case. As in the case of Dasaprakash Bottling Co. , the particulars for the grant of allowance of depreciation were available with the Income-tax Officer and it is of no significance and in so far as
the requirement of Section 34 of the Act is concerned, the particulars should be furnished in the return. The assessee in the instant case, had furnished the particulars and in Dasaprakash Bottling Co.’s case this court held that a reading of Sections 32 and 34 together would show that the allowance of depreciation would be available to the assessee in all cases, and it is open to the Income-tax Officer to disallow the claim, if the assessee did not furnish the prescribed particulars. This court also held that it is open to the Income-tax Officer to grant “depreciation” even if the assessee had not furnished necessary particulars as the computation of income under the Act is the computation of the real or proper statutory income and this income could be arrived at only after allowing the deductions available under the law. The ratio of the decision in Dasaprakash Bottling Co.’s case would apply to the facts of the case and in view of the judgment of this court, we are bound to follow the said judgment.
6. The Tribunal, in our view, has tried to distinguish the application of the decision in Dasaprakash Bottling Co.’s case on the ground that the particulars were available in Dasaprakash Bottling Co.’s case , but the particulars were withdrawn in the instant case by the assessee. The ratio of the decision of this court is that the grant of depreciation is a statutory allowance, and even if the assessee had not furnished the particulars, it is open to the Income-tax Officer to grant the depreciation. So also, it would be perfectly open to the Income-tax Officer to disallow the claim, if the assessee had not furnished the particulars. Therefore, the decision of this court in Dasaprakash Bottling Co.’s case , would apply to the facts of the case.
7. The Allahabad High Court in Ascharajlal Ram Parkash v. CIT [1973] 90 ITR 477 has taken a view that though the assessee did not claim depreciation for a plant and had also not given necessary particulars, the Income-tax Officer was bound to arrive at the true figures of the profits earned in the business and he has jurisdiction to grant depreciation even if the assessee did not file necessary particulars in the return.
8. In CIT v. Andhra Cotton Mitts Ltd. [1996] 219 ITR 404, the Andhra Pradesh High Court referred to Section 143(1)(b)(iv) of the Act and held that while making the assessment under Section 143(1) of the Act, the Income-tax Officer has to allow depreciation allowance under Section 32 of the Act and if the depreciation is not allowed, under Sub-section (3) of Section 143 of the Act, the assessment shall be deemed to be incorrect, inadequate and incomplete for the purpose of Section 143(1) of the Act. The Andhra Pradesh High Court, therefore, held that where the assessee deliberately withheld the information, it could not mean that no deduction for depreciation should be given computing the income. Therefore,
it is not open to the assessee to withdraw the claim for depreciation allowance where particulars were available in accordance with Section 34 of the Act and where the particulars were available, the Income-tax Officer is bound to allow the deduction for depreciation in computing the business income of the assessee. We are in respectful agreement with the view expressed by the Andhra Pradesh High Court in CIT v. Andhra Cotton Mills Ltd. [19961 219 1TR 404.
9. The Supreme Court in CIT v. Mother India Refrigeration Industries (P.) Ltd. held that the current depreciation is always treated as a first charge on the profits and the charge is recognised by the basic and well recognised principle of commercial accountancy. The above decision of the Supreme Court makes it clear that the current depreciation, even according to the well established principle of accountancy, is regarded as a first charge on the profits and once it is the first charge, it is not open to the assessee to withdraw its claim for depreciation.
10. The Tribunal distinguished the decision of the Supreme Court in the case of Delhi Cloth and General Mills Co. Ltd. v. State of U. P. . The Supreme Court dealt with a case arising under the U. P. Agricultural Income-tax Act, 1948. That case dealt with the option regarding the method of computation and whether it is permissible for the assessee to change his option by filing a revised return. The decision of the Supreme Court, as rightly pointed out by the Tribunal, has no connection with the issue that arises in the reference before us.
11. The contention of learned counsel for the assessee was that the assessee had withdrawn the original return by filing a revised return and the particulars filed along with the original return were also withdrawn by filing the revised return. Learned counsel for the assessee relied upon the decision of the Bombay High Court in CIT v. Shri Someshwar Sahahari Sakhar Karhhana Ltd. [1989] 177 ITR 443, the decisions of the Punjab and Haryana High Court in the case of Beco Engineering Co. Ltd. v. CIT[1984] 148 ITR 478 and CIT v. Friends Corporation [1989] 180 ITR 334, the decision of the Karnataka High Court in the case of CIT (Chief) (Admn.) v. Machine Tool Corporation of India Ltd. [1993] 201 ITR 101 and the later decision of the Andhra Pradesh High Court in the case of CIT v. Andhra Cotton Mills Ltd. [1997] 228 ITR 30 wherein earlier case-laws on the subject have been dealt with. The proposition laid down by various High Courts is that where the assessee has filed its return claiming depreciation at the first instance and then filed a revised return enclosing a covering letter stating that the depreciation claimed in the original return is withdrawn, the assessee had a choice not to claim depreciation allowance and if the assessee had chosen not to claim it, the Income-tax
Officer was not entitled to grant deduction on account of depreciation. As we have already held, we are bound by the earlier decision of this court in Dasaprakash Bottling Co.’s case [1980] 122 ITR 9. 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.
12. The circular of the Board relied upon by the Tribunal has no application to the facts of the case. In that circular, the Board has merely reiterated that if the particulars are not available, it would be open to the Income-tax Officer not to grant depreciation allowance. The reliance placed by the Tribunal on the said circular is misplaced. The attempt on the part of the Tribunal to distinguish the application of the decision of this court in Dasaprakash Bottling Co.’s case [1980] 122 ITR 9 on the facts of the case, in our opinion, is not warranted. As we have already seen, the apex court has held that the current depreciation is the first charge on the profits and under the scheme of the Act it is the duty of the Income-tax Officer to grant depreciation and without granting depreciation, it is not possible to arrive at the true and proper income of a particular assessment year and it will disturb the priorities in granting deduction of various statutory allowances. The option of the assessee in the matter of grant of depreciation after the particulars were available is
practically nil and it is the duty of the Income-tax Officer to determine the total income under the Act and if he finds that there are particulars for the grant of depreciation, as an Officer to determine the correct income of the assessee, he has jurisdiction to grant the depreciation even where the assessee has not desired the deduction for reasons of its own and there is no question of bargain in the grant of statutory allowances. If the choice is granted to the assessee in the matter of grant of statutory allowances, it would in effect distort the determination of the total income and it will contort the priorities in the matter of granting statutory deduction available under the Act. The Tribunal, in our opinion, is not correct in holding that it is not open to the Income-tax Officer to allow depreciation. Accordingly, we answer questions Nos. 1, 2, 3, 4 and 5 in the negative and in favour of the Revenue.
13. In so far as the sixth question is concerned, it relates to the grant of depreciation on expenditure capitalised during the previous year relevant to the assessment year 1976-77. The amount of Rs. 23,21,021 was capitalised in the earlier assessment year 1976-77 and we have by the judgment of even date in the assessee’s own case in T. C. No. 480 of 1984 (CIT v. Southern Petro Chemical Industries Corporation Ltd. (No. 1) [1998] 233 ITR 391 (Mad)) for the assessment year 1976-77 upheld the view of the Appellate Tribunal on the question of capitalisation of certain expenditure and once the amounts were capitalised, the assessee would be entitled to depreciation on the said amount capitalised. Accordingly, we answer the sixth question in the affirmative and against the Revenue.
14. The seventh question relates to the grant of depreciation on roads. The Supreme Court in the case of CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. held that the factory roads should be treated as a part of the buildings. Following the said decision, we answer the seventh question in the affirmative and against the Revenue.
15. The eighth question deals with the grant of depreciation on laboratory equipment at the rate of 15 per cent. The Appellate Tribunal followed its earlier order wherein it was found that the assessee had furnished a list of equipment and the officers of the assessee-company had certified that those machines were used to test chemicals, acids and gases which affect the equipment and those chemicals, etc., so tested have acidic and alkali contents which are stated to have corrosive effect. The finding that the machinery and plant came into contact with corrosive chemicals is a finding of fact and we are of the opinion that the Tribunal has come to the correct conclusion in holding that the assessee was eligible for 15 per cent, depreciation. Accordingly, we answer the eighth question in the affirmative and against the Revenue.
16. In the result, we answer questions Nos. 1 to 5 in the negative and in favour of the Revenue and questions Nos. 6 to 8 in the affirmative and against the Revenue. In view of the divided success there will be no order as to costs.
