Interpretation of Section 32(2) of Income Tax Act: SC disposes of SLP filed by Income Tax Dept [Read Order]

The Supreme Court of India disposes of the Special Leave Petition ( SLP ) filed by the Income Tax Department in the challenge regarding the interpretation of Section 32(2) of the Income Tax Act, 1961.

The SLP arose out of impugned final judgment and order dated 05-02-2018 in ITA No. 46/2018 passed by the High Court of Gujarat at Ahmedabad. A Two-Judge of the Supreme Court of Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar observed that “In view of the order passed in PCIT vs. Petrofils Co-operative Ltd, the Special Leave Petitions are disposed of. Pending applications, if any, shall stand disposed of.” In PCIT vs. Petrofils Co-operative Ltd, the Supreme Court held that “In view of the judgments on the interpretation of Section 32(2) of the Income Tax Act delivered by Delhi High Court, Gujarat High Court, Madras High Court and Bombay High Court, upheld by this Court by special leave petitions being dismissed, we do not agree with the Additional Solicitor General that the question of law has to be determined in these special leave petitions.”

The provision for permitting depreciation is included in Section 32 of the Income Tax Act of 1961. This section is governed by Rule 5 of the Income Tax Rules, 1962. The Income Tax Act permits the deduction when the cost of the tangible or intangible asset utilised by the assessee decreases. The income-tax department determines the depreciation at the time of the deduction based on the asset’s life cycle cost, not the asset’s total cost.

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