Kosha Cubidor Containers Ltd. V. Dy. C.I.T. (Asstt)

TAXAP/209/2002

AI Insights

Kosha Cubidor Containers Ltd. appealed against the decision of the Income Tax Appellate Tribunal, which had disallowed their claim for depreciation on plant and machinery used during trial production. The main legal issue was whether the Tribunal was correct in law and on facts in disallowing the depreciation allowance under section 32 of the IT Act, 1961. The appellant argued that their case was similar to precedents where depreciation was allowed for assets used in trial production. The court agreed with the appellant, referencing the case of Assistant Commissioner of Income Tax v. Ashima Syntex Ltd. and others, which supported the claim for depreciation under similar circumstances.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 814650 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 14-10-2014
• Assessment Year: misc
• Other Referred Cases: Assistant Commissioner of Income Tax v. Ashima Syntex Ltd., Commissioner of Income-Tax v. Mentha and Allied Products
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S UDHIR M EHTA; MAUNA BHATT
• Assessee Lawyers: S N DIVATIA
• Keywords: Depreciation allowance; Plant and machinery; Trial production
• Section: 32

Judgement Text

"O/TAXAP/209/2002 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 209 of 2002 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI Sd/- and HONOURABLE MR.JUSTICE K.J.THAKER Sd/- ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? No 5 Whether it is to be circulated to the civil judge ? No ================================================================ KOSHA CUBIDOR CONTAINERS LTD.....Appellant(s) Versus DY. C.I.T. (ASSTT)....Opponent(s) ================================================================ Appearance: MR SN DIVATIA, ADVOCATE for the Appellant(s) No. 1 MR SUDHIR M MEHTA, ADVOCATE for the Opponent(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and Page 1 of 5 O/TAXAP/209/2002 JUDGMENT HONOURABLE MR.JUSTICE K.J.THAKER Date : 14/10/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.Heard learned Advocates appearing for the parties. 2.By way of this Appeal, the appellant – original assessee has challenged the judgment and order of the Income Tax Appellate Tribunal, Ahmedabad Bench 'C' dated 01.06.2001 whereby the Tribunal in I.T.A. No.4114/Ahd/1995 (Asst. Year 1992-93) has dismissed the Appeal, and disallowed the deprecation which was claimed by the assessee. 3.This Court while admitting the Appeal on 05.08.2002 had framed the following issue :- “Whether on the facts and circumstances of the case, the Tribunal is right in law and on facts in disallowing the assessee's claim for depreciation allowance under section 32 of the IT Act, 1961 in respect of plant and machinery used in trial production during the year?” 4.Learned Counsel for the appellant contended that the issue is squarely covered by the decision of this Court in the case of Page 2 of 5 O/TAXAP/209/2002 JUDGMENT Assistant Commissioner of Income Tax v. Ashima Syntex Ltd. reported in 251 Income Tax Reports 133, which is subsequently followed in the case of Commissioner of Income-Tax v. Mentha and Allied Products reported in 326 Income Tax Reports 297. The relevant paragraph of the Head Note of the decision in the case of Assistant Commissioner of Income Tax v. Ashima Syntex Ltd. (supra) reads as under :- “The assessee was a manufacturer of fabrics. During the accounting year relevant to the assessment year 1993- 94, it imported air-jet looms from Japan. It was stated that the assessee commenced trial production on March 26, 1993, and some cotton fabrics were also produced which had been shown as closing stock and that the assessee was entitled for deprecation as the assets of the new division were put to use during the previous year on trial run basis. The Income-tax Officer rejected the claim of the assessee on the ground up to the end of the accounting year only tests and trials were going on and success was achieved only at the end of the accounting year and it could not be said that the assessee set up the business up to the end of the previous year. However, the Tribunal allowed the appeal of the assessee. On further appeal : Held, that in the instant case, the Tribunal on appreciation of evidence arrived at a conclusion that plant and machinery was used from March 26, 1993, till the end of the accounting Page 3 of 5 O/TAXAP/209/2002 JUDGMENT year, i.e., March 31, 1993. The Tribunal also found that grey cotton was manufactured and with the permission of the authorities of the Kandla Port Trust, the material was disposed of. The question was not one of setting up a new unit, but the question was of expansion of the unit. The Tribunal had found that 2,68,412 meters of grey cloth was manufactured. Law does not require that there must be optimum production for granting the benefit. Law only requires that there must be use of plant and machinery for the purpose of business. The assess was entitled to depreciation on the machinery. 5.In that view of the matter, the answer stands answered in favour of the assessee. We are of the opinion that no elaborate discussion of facts and detailed reasons be given for allowing the above Appeal as the facts of this case are akin to the facts in the decision on which reliance is placed hereinabove. 6.Hence, the Tax Appeal is allowed to the aforesaid extent in favour of the assessee and against the revenue. Sd/- (K.S. JHAVERI, J.) Sd/- (K.J. THAKER, J) Page 4 of 5 O/TAXAP/209/2002 JUDGMENT CAROLINE Page 5 of 5 "