Commissioner of Income Tax vs Mahindra Sintered Products Ltd.

Kania, J.—Only one question is referred to us in this reference u/s 256(1) of the Income Tax Act, 1961. The said question runs as follows :

"Whether, the Tribunal was right in allowing for the assessment year 1971-72, the assessee''s claim for depreciation u/s 32 of the Income Tax Act, 1961, in respect of plant and machinery of Rs. 33,781 continued to be used for scientific research notwithstanding the deduction allowed to the assessee in respect of such capital expenditure u/s 35 of the said Act in the earlier years, namely, Rs. 25,409 for the assessment year 1969-70 and Rs. 8,372 for the assessment year 1970-71 ?"

The only facts relevant for the determination of the question referred to us are that the assessment year with which we are concerned is the assessment year 1971-72. In respect of the assessment for this year, a deduction was claimed u/s 32(1)(ii) of the Income Tax Act, 1961, in respect of laboratory equipment used for scientific research and development and the depreciation claimed was to the extent of Rs. 33,781. The depreciation claim was on the ground that the said plant continued to be used for scientific research in the relevant previous year. In the earlier years, a deduction had been allowed in respect of these very assets u/s 35 of the said Act.

The submission of Mr. Jetly, learned counsel for the Revenue, is that in view of the retrospective amendment to clause (iv) of sub-section (2) of section 35 of the Income Tax Act, 1961, the depreciation claimed by the assessee could not have been allowed. It appears that the submission of Mr. Jetly is well-founded. The plain language of the said clause which has been amended with retrospective effect from April 1, 1962, by the Finance (No.2) Act, 1980, shows that no deduction can be allowed, inter alia, under clause (ii) of sub-section (1) of section 32 of the said Act where in any previous year a deduction has been allowed u/s 35 of the said Act for the assets in question. In the present case, the facts found clearly show that deductions to the extent of the full value of the assets in question had already been allowed in the previous years u/s 35 in respect of the very assets for which the deduction was claimed subsequently by the assessee u/s 32(1)(ii), as stated above. As far as Mr. Hariharan is concerned, he has made no submission and states that he has been instructed not to make any submission in the matter.

In the result, the question referred to us is answered in the negative and in favour of the Revenue.

Looking to the facts and circumstances, there will be no order as to costs.