Commissioner of Income tax V. M/sKarvey Consultants Ltd.,

ITTA/255/2003

AI Insights

The case revolves around the dispute concerning the depreciation rate applicable to assets acquired by the respondent during the assessment year 1995-96. The primary legal question was whether the asset, falling under the first proviso to Section 32(1) of the Income Tax Act, is subject to the restrictions of the second proviso, which limits depreciation to 50% if the asset is used for less than 180 days in the relevant assessment year. The Income Tax Appellate Tribunal had previously allowed 100% depreciation, which was contested by the Department. The court, referencing previous judgments and a circular from the Central Board of Direct Taxes, affirmed that the asset in question, being a gas cylinder costing less than 5,000/-, is not subject to the 180 days usage requirement and qualifies for full depreciation.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 677719 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 03-12-2014
• Assessment Year: misc
• Other Referred Cases: Gasolec Appliances (P) Ltd. v. DCIT (Assts), Commissioner of Income Tax v. Goodlas Nerolack Paints Limited, Commissioner of Income-tax vs. Soundararaja Finance Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Respondent
• Court: HIGH COURT
• Department Lawyers: P KRISHNA
• Assessee Lawyers: S R ASHOK
• Keywords: Assessment Year; Asset; Business use; Depreciation; Income tax appellate tribunal
• Section: 32(1)

Judgement Text

"HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No.255 of 2003 JUDGMENT:- (Per Hon’ble Sri Justice L.Narasimha Reddy) This appeal is filed against the order, dated 14.02.2003, passed by the Hyderabad Bench ‘B’ of the Income Tax Appellate Tribunal in I.T.A.No.920/Hyd/1998, raising the following question of law:- “Whether the Appellate Tribunal is justified in holding that the asset falling within the purview of 1st proviso to Section 32(1) of the I.T. Act is not subject to the restrictions covered by the 2nd proviso to the said section and the assessee is entitled to 100% depreciation on such asset in spite of its user for business was less than 180 days during the relevant assessment year?” Heard Sri S.R.Ashok, learned Senior Standing Counsel for the appellant and Sri P.Murali Krishna, learned counsel for the respondent. The relevant assessment year is 1995-96 corresponding to financial year 1994-95. The only controversy is about the depreciation on the assets acquired by the respondent during the relevant period. The Assessing Officer allowed the depreciation to the extent of 50% only by applying third proviso to Section 32(1)(ii) of the Act. The Commissioner (Appeals) confirmed the same and on further appeal, the Income Tax Appellate Tribunal, allowed 100% depreciation, through common order in I.T.A.Nos.1966 and 1967/Hyd/1996 following the judgment in Gasolec Appliances (P) Ltd., v. DCIT (Assts). As against the orders of the Tribunal, referable to I.T.A No.1967/Hyd/96, Department preferred appeals in I.T.T.A.Nos.8 and 44 of 2002 and this Court through a common judgment dated 23.07.2014 held that if the article or item which formed block of assets has been put to use for a period of less than 180 days, the deduction shall be restricted to 50% of the cost thereof. While dealing with the above appeals through a detailed order dated 23.07.2014, we held that the cylinders purchased by the assessee qualify for 100% depreciation irrespective of the extent of use. We further clarified that the requirement as to the extent of use becomes relevant only for the items covered by the third proviso to Section 32 of the Income Tax Act (for short ‘the Act’). In the instant case, the items involved are gas cylinders, whose cost is less than 5,000/-. They are covered by the first proviso to Section 32 of the Act and the requirement as to the extent of use is totally irrelevant for such items. We also noticed that this issue was clarified by the Central Board of Direct Taxes vide Circular No.591 dated 30.01.1991 and it was taken note of in Commissioner of Income Tax v. Goodlas Nerolack Paints Limited[1]. The relevant portion is reproduced as under: “It is clarified that where the actual cost of any machinery or plant does not exceed five thousand rupees, the actual cost thereof shall be allowed as a deduction without any restriction, in respect of the previous year in which the machinery or plant is first put to use by the company for the purpose of its business or profession.” This aspect was also noticed by the Madras High Court in Commissioner of Income-tax vs. Soundararaja Finance Ltd.,[2] and the same view was taken. Therefore, we dismiss the appeal answering the question referred above, in favour of the assessee and against the revenue. There shall be no order as to costs. Miscellaneous petitions, if any, filed in this appeal shall also stand disposed of. ____________________________ L. NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J Date:03.12.2014 Gk/Kdl [1] (1991) 188 ITR (St.)1 at 6 [2] (2006) 283 ITR 559 (Mad) "