Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 2
CASE NO.:
Appeal (civil) 1183 of 2008
PETITIONER:
Jt. Commissioner of Income Tax,Valsad, Gujarat
RESPONDENT:
M/s. United Phosphorous Ltd
DATE OF JUDGMENT: 08/02/2008
BENCH:
S.H. Kapadia & B. Sudershan Reddy
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO. 1183 OF 2008
(Arising out of S.L.P. (C) No.21331 of 2002)
KAPADIA, J.
Delay condoned.
2. Leave granted.
3. In this civil appeal filed by the Department two questions
of law arise for determination which questions are as follow:
(1) Whether interest paid in respect of borrowings
on capital assets not put to use in the
concerned financial year can be permitted as
allowable deduction under Section 36(1)(iii) of
the Income-tax Act, 1961?
(2) Whether respondent-assessee had an option in
law to claim partial depreciation in respect of
any block of assets.
4. Our answer to the above-mentioned question No.(1) is
squarely covered by our decision in favour of the assessee and
against the Department in the case of Dy. Commr. of Income
Tax, Ahmedabad v. M/s. Core Health Care Ltd. in Civil
Appeal Nos.3952-55 of 2002.
5. Regarding the question No.(2), quoted above, it may be
noted that the High Court has relied upon the judgment of this
Court in Commissioner of Income-tax v. Mahendra Mills &
Anr. \026 (2000) 243 ITR 56 in which it has been held that the
assessee has an option to claim depreciation. However,
Section 34(1) of the Income-tax Act, 1961 (for short, "1961
Act") has been omitted w.e.f. 1.4.88. Therefore, we are
remanding the matter to the High Court after setting aside the
impugned order of the High Court on this question, with the
direction to the High Court to consider : whether the assessee
has an option in law to claim partial depreciation in respect of
block of assets. In the case of Mahendra Mills (supra) the
concept of block of assets was not there. In our view,
substantial question of law did arise for determination before
the High Court under Section 260A of the 1961 Act,
particularly when Section 34(1) of the 1961 Act stood omitted
w.e.f. 1.4.88. The High Court is also requested to consider
whether the judgment of this Court in the case of Mahendra
Mills (supra) would apply to the assessment years under
consideration. In this connection the High Court is also
requested to take into account the scope of Explanation 5 to
Section 32(1) of the 1961 Act, made by the Finance Act, 2001.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 2
6. Accordingly question No.(1) is answered in favour of
assessee and against the Department and question No.(2) is
remitted to the High Court. Consequently the Department’s
civil appeal is partly allowed with no order as to cost.