A division bench of the Delhi High Court upheld the ITAT order wherein it was held that the deductible income under Section 10 (29) of the Income Tax Act is to be computed after excluding depreciation as part of the expenditure and taking gross receipts from warehousing and Inland Container Depot/ Container Freight Station.
The department had approached the High Court against the order contending that depreciation is like any other business expense which is debited to the profit and loss account and, which, goes to reduce the tax liability of an Assessee.
Relying on the Apex Court ruling in the case of Nectar Beverages Pvt. Ltd. v. DCIT, Justices S. Muralidhar and Prathibha M Singh held that “irrespective of the provision in which the word ‘depreciation’ is used, owing to the very nature of the word, it is not a loss or an expenditure or a trading liability.”
The Top-Court, in the above case, while explaining the rationale behind insertion of Section 41(2) of the Act, delved into the aspect as to what was the nature of ‘depreciation’. “It has been emphasized by the Supreme Court that ‘depreciation’, by its very nature and as used in Section 41(1) of the Income Tax Act, is neither loss, nor expenditure, nor trading liability’.”
Read the full text of the Order below.
