Sec 32 Benefit not available to CAs' - Supreme Court Judgment
November 29, 2007
Supreme Court of India
G.K. Choksi & Company
v.
Commissioner of Income-tax
Section 32 of the Income-tax Act, 1961- Depreciation - Allowance/Rate of - Assessment year 1984-1985 - Whether wherever legislature intended that benefit of a particular provision should be for both business or profession, it has used words 'business or profession' and wherever it intended to restrict the benefit to either business or profession, has used either word 'business' or word 'profession' - Held, Yes - Whether scope of word 'business' as appearing in section 32(1)(iv) does not include in it word 'profession' as well - Held, Yes - Assessee a firm of Chartered Accountants constructed a building for residence of employees and claimed initial depreciation under section 32(1)(iv) at 40 per cent- Revenue denied same on ground that said provision is applicable to an assessee carrying on a business and not to an assessee carrying on a profession - Whether in view of legal provision, assessee was not entitled to deduction under section 32(1)(iv) - Held, Yes
Words & Phrases : Word 'business' as occurring in section 32(1)(iv) of the Income-tax Act, 1961
Interpretation of Statute : Rule of purposive interpretation
Facts
The assessee, a firm of Chartered Accountants, constructed a building for the purpose of residence for its low paid employees and claimed deduction of initial depreciation under section 32(1)(iv) at rate of 40 per cent. The Assessing Officer, however, rejected the claim on the ground that section 32 is applicable to an assessee carring on 'business' and the same is not available to a professional. On appeal, the Commissioner (Appeals) allowed the claim of the assessee. On further appeal, the tribunal restored the order of the Assessing Officer. On reference the High Court upheld the same.
On appeal to Supreme Court,
Held
Section 32(1) of the Act does not help the assessee in any way to construe the word 'business' appearing in sub-section 32(1)(iv) to include 'profession' as well. The legislature intended to have different scope for business and profession in section 32(1). If the legislature had intended to include 'profession' in the word 'business', then there was no need to mention two different words, i.e., 'business' or 'profession' in section 32(1) of the Act. [Para 12]
Section 32(1) stipulates that on buildings, machinery, plant or furniture which is owned by an assessee and used for the purposes of 'business or profession', depreciation shall be available by way of deduction. section 32(1) uses the phrase 'the following deductions shall'. Therefore it is apparent that the said sub-section is laying down general conditions or basic requirements, on fulfillment of which, an assessee shall become eligible for deductions as provided in the various clauses which follow. From the Scheme of the section it is discernible that various clauses shall operate on further specific conditions laid down in each individual clause. Clause (i) deals with case of ships other than ships ordinarily plying on inland waters, clause (ii) pertains to buildings, machinery, plant or furniture, other than ships and is applicable to both business and profession in regard to the claim for depreciation in respect of the building , machinery, plant or furniture. In clause (iv) the legislature has used the word 'business' only. It means that the legislature was conscious of the fact that the business and profession are different and separate and they cannot be used interchangeably. It is a pointer to the fact that the Legislature under clause (iv) intended to restrict the benefit to the assessees carrying on business only. In sub-clause (ii) the legislature has specifically extended the benefit of depreciation to the assessees carrying on 'business' as well as 'profession' whereas in sub-section (iv), the legislature has restricted the benefit to the asseessees carrying on 'business' only. [Para 13]
Section 32(1) lays down the general conditions or basic requirements on fulfillment of which an assessee shall become eligible for deduction as provided under various clauses which follow. Clauses (i), (ii) and (iv) operate in different fields and deal with different set of assessees for the purposes of claiming depreciation. [Para 16]
Part D of the Act consists of sections 28 to 43 and deals with profits and gains of business or profession. Though the phrase has been used in certain sections as 'business or profession", but nowhere has the phrase been used as the 'business and profession". In fact, wherever the legislature intended that the benefit of a particular provision should be for both business or profession, it has used the words 'business or profession' and wherever it intended to restrict the benefit to either business or profession, then the legislature has used the word either 'business' or 'profession', meaning thereby that it intended to extend the benefit to either 'business' or 'profession', i.e., the one would not include the other. [Para 17]
The word 'business' occurring in clause (iv) of section 32(1), by no stretch of imagination, can be said to include 'profession' as well. If the expression 'business' is interpreted as including within its scope 'profession", it would not mean that the lacuna has been made good by giving a wider interpretation to the word business. There is nothing in section 32(1)(iv) which envisages the scope of word 'business' to include in it 'profession' as well. If the expression 'business' is interpreted to include within its scope 'profession' as well, it would be doing violence to the provisions of the Act. Such interpretation would amount to first creating an imaginative lacuna and then filling it up, which is not permissible in law. The contention of the assessee that section 32(1)(iv) should be given purposive interpretation to include 'profession', had thus to be rejected. [Para 18]
In view of the above reasons, the appeal was to be dismissed. [Para 19]
