Chintan Shah (-) (534 Points)
11 March 2010Dear friends,
Is it compulsory to provide depreciationin the books of a firm or proprietorship business of an individual assessee in order to claim depreciation under Section 32?
If its a company than is it necessary?
Thx in adv.....
Regards,
Chintan
Ratan Deep Saxena
(Asstt Manager (Accounts & Finance))
(2998 Points)
Replied 11 March 2010
CASE LAW DETAILS
Decided by: Bombay High Court Full Bench), In The case of: Plastiblends vs. ACIT, Appeal No.: 1282 OF 2007, Decided on: 16th October, 2009.
SUMMARY OF CASE LAW
The Full Bench was constituted to consider whether for the purposes of allowing deduction under Ch. VI-A depreciation could be thrust on the assessee even though it had disclaimed the same for purposes of regular assessment. The assessee argued that as in accordance with Mahendra Mills 243 ITR 56 (SC), depreciation was optional and as Expl. 5 to s. 32 came into force only from AY 2002-2003, depreciation could not be thrust even for purposes of Ch. VI-A. HELD, deciding against the assessee:
(i) Mahendra Mills 243 ITR 56 has to be understood in the context in which the said decision was rendered. The decision was rendered in the context of determining total income under Ch. IV and not in the context of determining thededuction under Ch. VIA. Mahendra Mills has not laid down any proposition of law that by disclaiming depreciation, the assessee can claim enhanced deduction allowable under any other provision in the Act.
(ii) The fact that the assessee may have an option to disclaim current depreciation in computing total income under Ch. IV does not mean that the quantum of deduction allowable u/s 80 – IA is dependent upon the assessee claiming or not claiming current depreciation.
(iii) Ch. VI-A is a Code by itself and the special deduction granted therein has to be computed on the gross total income determined after deducting all deductions allowable under ss. 30 to 43D and any device adopted to reduce or inflate the profits of eligible business has got to be rejected. By not claiming currentdepreciation, the assessee seeks to inflate the profit linked incentives provided u/s 80-IA which is not permissible.
Note: The judgement of the Special Bench in Vahid Paper Mills 98 ITD 165 (SB) (Ahd) is impliedly approved.
See Also: Dabur India Ltd vs. CIT (Delhi High Court) where the same view was taken.
KRISHNA PALLAVUR
(CA FINAL)
(79 Points)
Replied 11 March 2010
Chintan Shah
(-)
(534 Points)
Replied 11 March 2010
Friends,
What I am asking is whether the assessee has to provide the depreciation in the books of accounts to claim it?? Is there any section that bars the assessee the benefit of depreciation if it has not been provided in books of accounts also??
Regards
Chintan
Ratan Deep Saxena
(Asstt Manager (Accounts & Finance))
(2998 Points)
Replied 11 March 2010
as per section 32 it is mandatory to claim depreciation & same shud be provided in the books of accounts.
regards,
ratan
Prasanth Nair V
(ACA,ACS,CWA Final,Mcom)
(557 Points)
Replied 11 March 2010
Even if u dont claim, it doesnt matter.
but while assessment they will take it into consideration. as section 32 is mandatory..
CA Priya
(CS Final)
(1049 Points)
Replied 11 March 2010
sairam
(student)
(118 Points)
Replied 12 March 2010
according to section 32 even if assesee dont claim depreciation they will take depreciation into consideration as it is mandatary
ca tarun sharma
(SERVICE)
(277 Points)
Replied 12 March 2010
for ind/firm dep is not required to be charged in p/l a/c for IT purpose but it shall be allowed u/s 32 while computing business income in computation statement
in case of company dep also not required to be debited in p/l a/c for IT purpose but dep must be provided as per rate prescribed in companies act
after that dep as per co act is disallowed & as per IT Act is allowed in computation income
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