There have been differing views on the matter under the provisions as they stood prior to assessment year 1988-89 when Section 32(1) made it clear that, in respect of an asset used for the purpose of the business, depreciation would, subject to the provisions of Section 34, be allowed. And Section 34(1) made it clear that the depreciation would be allowed only if the prescribed particulars were furnished in respect of the concerned assets.

However, with effect from assessment year 1988-89, the charge of depreciation was transformed from that on individual assets to that on blocks of assets. Simultaneously, the provisions of Section 34(1), which provided for prescribed particulars being furnished, were deleted. In this background, it would be relevant to see whether there can still be a debate about the option to either claim or not claim thedepreciation resting with the assessee. However, before this is addressed, it would be interesting to see the case law as it has developed in the scenario prior to assessment year 1988-89.

First, the views against the option being available. In Ascharajlal Ram Parkash vs CIT, 90 ITR 477 (All), it was held that if in the course of proceedings, the assessing officer (AO) comes to know of the particulars, he was bound to grant the depreciation, whether or not the assessee had given the necessary particulars.

In Dasaprakash Bottling Co vs CIT, 122 ITR 9 (Mad), it was held that it would be open to the AO to grant depreciation even if the assessee had not furnished the prescribed particulars as the computation of the 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 allowable under the law. Here the prescribed particulars had been furnished under protest and the assessee did not want to claim depreciation.

InCIT vs Southern Petro Chemicals (No 2), 233 ITR 400 (Mad), 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 AO to grant depreciation. So also it would be perfectly open to the AO to disallow the claim, if the assessee had not furnished the particulars. Section 34 of the act does not require that the particulars of depreciation should be furnished along with the return.

A persuasive reason for taking a stricter and unfavourable view in these cases was the decision of the Supreme Court in CIT vs Mother India Refrigeration Industries (P) Ltd, 155 ITR 711 (SC) where it was held that current depreciation is always treated as a first charge on the profits and the charge is required by the basic and well-recognised principle of commercial accountancy. Thus, it was not open to the assessee to withdraw its claim for depreciation.

Now, the views in favour of the option being available. In Beco Engineering Co Ltd vsCIT, 148 ITR 478 (P&H), the court held that if, in the revised return, the assessee did not claim any depreciation and hence the particulars for determining depreciation, etc., were not available to the AO, it could not be held that the AO had no option but to compute and allow depreciation to the assessee for the relevant years. In this regard, the court referred to a Circular No 29D(XIX-14) of 1965, dated August 31, 1965, which 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 AO should estimate the income without allowing depreciation.

In CIT vs Friends' Corporation, 180 ITR 334 (P&H), the court, held that where neither the depreciation was claimed nor the requisite particulars furnished, the AO was not competent to allow it suo moto against the wishes of the assessee. The court also drew support from Muthukaruppan Chettiar (Pr.Al.M) vs CIT [1939] 7 ITR 76 (Mad) and Rao Bahadur S Ramanatha Reddiar vs CIT[1928] 3 ITC 10 (Rang) for the proposition that the assessee must furnish particulars for claiming depreciation allowance.

In CIT vs Someshwar Sahakari Sakhar Karkhana Ltd, 177 ITR 443 (Bom), it was held that the AO was obliged to allow the deductions for depreciation "only if the prescribed particulars have been furnished". Further, it placed importance on the use of the words "allowed" and "allowance" in the provisions which, according to it, appeared to contemplate a claim or application by the assessee for the deduction provided for. In the absence of a claim or application by the assessee, the AO would not be "allowing" a deduction. A similar view has been taken in Chief CIT (Admn) vs Machine Tools Corporation of India Ltd, 201 ITR 101 (Kar), where a revised return had been filed and the assessee withdrew its claim for depreciation.

It was further held that once a revised return was filed under Section 139(5), the original return is substituted by the revised return and the entries in the relevantcolumn of the original return, seeking depreciation, could not be used for any purpose. In CIT vs Andhra Cotton Mills Ltd, 219 ITR 404 (AP), the view taken was that no doubt the prescribed particulars are required to be furnished, keeping Section 34 in mind. Section 34 only ensures that correct information was available to the AO for allowing the proper deduction.

But this could not be construed to mean that where the assessee deliberately withholds the information, no deduction for depreciation could be given in computing the income. Current depreciation, the court said, is a first charge on profits and that charge cannot be ignored by withholding the particulars so as to avail of the setting off of an earlier year's loss which lapses by the prescribed period of limitation. Thus, here the court held that there was no option available to the assessee.

A different view was, however, taken in CIT vs Andhra Cotton Mills Ltd, 228 ITR 30 (AP). The court differentiated and explained its earlier decision, andheld when the 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 he has to require the assessee to furnish the requisite particulars for computing the depreciation allowance. Pertinently, the high court at the end of the judgement referred to the omission of Section 34(1) with effect from April 1, 1988.

From the above authorities it will be seen that there are differing views. However, these differing views are primarily based on the fact of Section 34(1) making a pre-condition of prescribed particulars being furnished. Since this requirement of prescribed particulars is no longer on the statute, with effect from April 1, 1988, it is submitted that there is no option available to the assessee to either claim or not claim depreciation. This position is further strengthened by the fact that even unabsorbeddepreciation is now subject to a limit of carry forward for a period of only eight years.

The author is a Mumbai-based chartered accountant