While dismissing an appeal filed by M/s Plastiblends India Limited, a two-judge bench of the Supreme Court held that assessee should claim for depreciation while computing incentive under section 80-IA of the Income Tax Act, 1961.
The bench overruled the assessees’ contention that for interpreting pre-amended Section 32 of the Act, co-ordinate bench ruling in Mahindra Mills was applicable wherein it was held that depreciation claim is optional.
Rejecting the above contention, Justices A K Sikri and Ashok Bhushan noted that co-ordinate bench in Mahendra Mills dealt with computing business income under Chapter IV, whereas the present case relates to computing deduction under Chapter VI-A of the Income Tax Act.
While distinguishing the two Chapters, the bench observed that Section 80-IA is a code by itself and contains provision for special deduction which is linked to profits. In contrast, Chapter IV of the Act, which allows depreciation under Section 32 of the Income Tax Act is linked to investment and therefore, Mahendra Mills ruling cannot be applied while interpreting Section 80-IA of the Income Tax Act.
Upholding the High Court’s observation, the bench observed that “Section 80-IA of the Act not only contains substantive but procedural provisions for computation of special deduction. Thus, any device adopted to reduce or inflate the profits of eligible business has to be rejected. The assessees/appellants want 100% deduction, without taking into consideration depreciation which they want to utilise in the subsequent years. This would be anathema to the scheme under Section 80-IA of the Act which is linked to profits and if the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided under Section 80-IA of the Act which cannot be permitted.”
Read the full text of the Judgment below.
