I did not claim depreciation in my return because it suits me not to. Can the assessing officer force it on me anyway?
No, on the law as it then stood. The Supreme Court held that where the assessee neither claims depreciation nor furnishes the prescribed particulars, the Income-tax Officer cannot thrust the allowance on him. Section 32 allows depreciation subject to section 34, and section 34 permits the deduction only if the prescribed particulars are furnished. Section 29 is not a complete code and must be read with section 34. Depreciation is a benefit for the assessee; a privilege cannot be turned into a disadvantage and an option cannot become an obligation. The Revenue's appeal was dismissed.
Decided by the Supreme Court (Supreme Court of India - D.P. Wadhwa and S.S.M. Quadri, JJ (judgment by Wadhwa, J)) on 2000-03-15, reported as AIR 2000 SC 1960; (2000) 3 SCC 615; (2000) 243 ITR 56; (2000) 109 Taxman 225; 2000 AIR SCW 1016. It bears on section 32, section 34, section 29, section 28 of the Income Tax Act 1961, in Deductions & Disallowances and Assessment & Scrutiny matters.
This settled a conflict that had run through six or seven High Courts on whether depreciation is a mandatory computation entry or a claim. It matters for two things beyond the allowance of the year: carry forward of business loss, which is larger if depreciation is not deducted, and the written down value of the block for later years. On that second point the Court applied Dharampur Leather - written down value is cost less depreciation actually allowed, and actually allowed does not mean notionally allowed, so a year in which no claim was made does not silently reduce the base. The Court disapproved the Allahabad view in Ascharajlal Ram Prakash and the Madras view in Dasa Prakash Bottling and Southern Petro Chemicals.
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The assessee was a company keeping its accounts on the mercantile basis. For assessment year 1974-75 it claimed no depreciation in its return. The Income-tax Officer noted the omission, rejected the assessee's contention that depreciation is a right the assessee is free to claim or not, computed current depreciation of Rs 37,61,652 and allowed it. The Commissioner (Appeals) allowed the assessee's appeal. The Tribunal dismissed the Revenue's appeal, and on a reference at the Revenue's instance the Gujarat High Court, following its own decision in Chokshi Metal Refinery, answered in favour of the assessee. The Revenue appealed to the Supreme Court. The same question had been answered both ways by different High Courts. Section 32 had since been amended with effect from 1 April 1988, but the Court noted that many references for earlier years were still pending.
The appeal was dismissed and the question answered in the affirmative, in favour of the assessee and against the Revenue: the Income-tax Officer could not grant depreciation where the assessee had not claimed it. Section 32 allows depreciation subject to section 34, and section 34 provides that the deduction shall be allowed only if the prescribed particulars have been furnished; those particulars are called for in detail by the prescribed form of return, and were formerly the subject of Rule 5AA. The Court approved the Board's circular of 31 August 1965, which directs that depreciation is not to be allowed where the particulars have not been furnished and no claim made. It upheld the view of the Bombay, Punjab and Haryana, Karnataka, Andhra Pradesh, Calcutta and Kerala High Courts, and held that the Gujarat decision in Gujarat State Warehousing Corporation, and the Allahabad and Madras decisions relied on by the Revenue, did not lay down the correct law. No order as to costs.
The Court read sections 28, 29, 32 and 34 together and found no ambiguity. Section 29 says income under section 28 shall be computed in accordance with sections 30 to 43A; it is not itself a complete code, and the direction to compute in accordance with those sections carries with it the bar in section 34. Because section 34 is not merely enabling, the absence of the prescribed particulars leaves the officer with no mandate to allow the deduction. The particulars are not a formality: the return form calls for them in detail, and Rule 5AA prescribed them while it stood. The Revenue's argument that depreciation must be deducted to arrive at commercial profit was met by the character of the allowance itself - it is provided for the benefit of the assessee, and a benefit cannot be forced on a person who does not want it. The Court read the 1955 circular as imposing only a duty to advise the taxpayer, adding that the officer should advise against claiming depreciation where that is the better course. It supported the conclusion from Dharampur Leather: written down value is actual cost less depreciation actually allowed, and a thing is allowed when it is claimed, so unclaimed depreciation is not notionally allowed. Jaipuria China Clay Mines, on which the Gujarat High Court had relied, had been read out of its context.
Provision for claim of depreciation is certainly for the benefit of the assessee. If it does not wish to avail that benefit for some reason, benefit cannot be forced upon him.
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Handle my notice → Ask a CA on WhatsAppNo, on the law as it then stood. The Supreme Court held that where the assessee neither claims depreciation nor furnishes the prescribed particulars, the Income-tax Officer cannot thrust the allowance on him. Section 32 allows depreciation subject to section 34, and section 34 permits the deduction only if the prescribed particulars are furnished. Section 29 is not a complete code and must be read with section 34. Depreciation is a benefit for the assessee; a privilege cannot be turned into a disadvantage and an option cannot become an obligation. The Revenue's appeal was dismissed. This was decided by the Supreme Court (Supreme Court of India - D.P. Wadhwa and S.S.M. Quadri, JJ (judgment by Wadhwa, J)) and bears on section 32, section 34, section 29, section 28 of the Income Tax Act 1961. It is reported as AIR 2000 SC 1960; (2000) 3 SCC 615; (2000) 243 ITR 56; (2000) 109 Taxman 225; 2000 AIR SCW 1016. This settled a conflict that had run through six or seven High Courts on whether depreciation is a mandatory computation entry or a claim. It matters for two things beyond the allowance of the year: carry forward of business loss, which is larger if depreciation is not deducted, and the written down value of the block for later years. On that second point the Court applied Dharampur Leather - written down value is cost less depreciation actually allowed, and actually allowed does not mean notionally allowed, so a year in which no claim was made does not silently reduce the base. The Court disapproved the Allahabad view in Ascharajlal Ram Prakash and the Madras view in Dasa Prakash Bottling and Southern Petro Chemicals. If it applies to you, the first step is this: Check the assessment year before relying on this: the Court was construing section 32 read with section 34 as they stood for years before 1 April 1988, and the depreciation provisions have been amended since.
The assessee was a company keeping its accounts on the mercantile basis. For assessment year 1974-75 it claimed no depreciation in its return. The Income-tax Officer noted the omission, rejected the assessee's contention that depreciation is a right the assessee is free to claim or not, computed current depreciation of Rs 37,61,652 and allowed it. The Commissioner (Appeals) allowed the assessee's appeal. The Tribunal dismissed the Revenue's appeal, and on a reference at the Revenue's instance the Gujarat High Court, following its own decision in Chokshi Metal Refinery, answered in favour of the assessee. The Revenue appealed to the Supreme Court. The same question had been answered both ways by different High Courts. Section 32 had since been amended with effect from 1 April 1988, but the Court noted that many references for earlier years were still pending. The matter was decided on 2000-03-15 by the Supreme Court (Supreme Court of India - D.P. Wadhwa and S.S.M. Quadri, JJ (judgment by Wadhwa, J)). On those facts the Supreme Court held as follows. The appeal was dismissed and the question answered in the affirmative, in favour of the assessee and against the Revenue: the Income-tax Officer could not grant depreciation where the assessee had not claimed it. Section 32 allows depreciation subject to section 34, and section 34 provides that the deduction shall be allowed only if the prescribed particulars have been furnished; those particulars are called for in detail by the prescribed form of return, and were formerly the subject of Rule 5AA. The Court approved the Board's circular of 31 August 1965, which directs that depreciation is not to be allowed where the particulars have not been furnished and no claim made. It upheld the view of the Bombay, Punjab and Haryana, Karnataka, Andhra Pradesh, Calcutta and Kerala High Courts, and held that the Gujarat decision in Gujarat State Warehousing Corporation, and the Allahabad and Madras decisions relied on by the Revenue, did not lay down the correct law. No order as to costs.
The Court read sections 28, 29, 32 and 34 together and found no ambiguity. Section 29 says income under section 28 shall be computed in accordance with sections 30 to 43A; it is not itself a complete code, and the direction to compute in accordance with those sections carries with it the bar in section 34. Because section 34 is not merely enabling, the absence of the prescribed particulars leaves the officer with no mandate to allow the deduction. The particulars are not a formality: the return form calls for them in detail, and Rule 5AA prescribed them while it stood. The Revenue's argument that depreciation must be deducted to arrive at commercial profit was met by the character of the allowance itself - it is provided for the benefit of the assessee, and a benefit cannot be forced on a person who does not want it. The Court read the 1955 circular as imposing only a duty to advise the taxpayer, adding that the officer should advise against claiming depreciation where that is the better course. It supported the conclusion from Dharampur Leather: written down value is actual cost less depreciation actually allowed, and a thing is allowed when it is claimed, so unclaimed depreciation is not notionally allowed. Jaipuria China Clay Mines, on which the Gujarat High Court had relied, had been read out of its context. In the words reproduced by the source cited on this page: "Provision for claim of depreciation is certainly for the benefit of the assessee. If it does not wish to avail that benefit for some reason, benefit cannot be forced upon him."
It was decided by the Supreme Court on 2000-03-15 and is reported as AIR 2000 SC 1960; (2000) 3 SCC 615; (2000) 243 ITR 56; (2000) 109 Taxman 225; 2000 AIR SCW 1016. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 32, section 34, section 29, section 28, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was dismissed and the question answered in the affirmative, in favour of the assessee and against the Revenue: the Income-tax Officer could not grant depreciation where the assessee had not claimed it. Section 32 allows depreciation subject to section 34, and section 34 provides that the deduction shall be allowed only if the prescribed particulars have been furnished; those particulars are called for in detail by the prescribed form of return, and were formerly the subject of Rule 5AA. The Court approved the Board's circular of 31 August 1965, which directs that depreciation is not to be allowed where the particulars have not been furnished and no claim made. It upheld the view of the Bombay, Punjab and Haryana, Karnataka, Andhra Pradesh, Calcutta and Kerala High Courts, and held that the Gujarat decision in Gujarat State Warehousing Corporation, and the Allahabad and Madras decisions relied on by the Revenue, did not lay down the correct law. No order as to costs. It arises in Deductions & Disallowances and Assessment & Scrutiny matters, on section 32, section 34, section 29, section 28 of the Income Tax Act 1961, and was decided by Supreme Court of India - D.P. Wadhwa and S.S.M. Quadri, JJ (judgment by Wadhwa, J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If you are working out written down value for an old block, ask whether depreciation was actually allowed in each past year, not whether it could have been - unclaimed depreciation does not reduce the base. If you want to withdraw a depreciation claim, do it by a valid revised return under section 139(5); the Court accepted that an assessment on a valid revised return cannot fall back on the original. Do not argue that the Board's 1955 circular on assisting taxpayers obliges the officer to grant a relief the assessee has not asked for; the Court read it as a duty only to advise.
Still good law. I read the opening, the statutory provisions set out and the whole of the concluding reasoning to the operative order. The judgment itself records that section 32 was amended with effect from 1 April 1988 and that it was deciding the position for earlier years; I checked no later amendment or authority in this session. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested page is clipped in the middle: the review of the competing High Court decisions is partly missing, though the question, the facts, the statutory provisions and the whole of the Court's own reasoning and order are present. I did not check whether a later amendment to section 32(1) has made the allowance mandatory, so a reader must read the current text of the section before applying this to a recent year. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed and the question answered in the affirmative, in favour of the assessee and against the Revenue: the Income-tax Officer could not grant depreciation where the assessee had not claimed it. Section 32 allows depreciation subject to section 34, and section 34 provides that the deduction shall be allowed only if the prescribed particulars have been furnished; those particulars are called for in detail by the prescribed form of return, and were formerly the subject of Rule 5AA. The Court approved the Board's circular of 31 August 1965, which directs that depreciation is not to be allowed where the particulars have not been furnished and no claim made. It upheld the view of the Bombay, Punjab and Haryana, Karnataka, Andhra Pradesh, Calcutta and Kerala High Courts, and held that the Gujarat decision in Gujarat State Warehousing Corporation, and the Allahabad and Madras decisions relied on by the Revenue, did not lay down the correct law. No order as to costs.
TaxSphere, “CIT v Mahendra Mills”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-mahendra-mills/ (validity last checked 2026-08-29)
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