2014 (9) TMI 823 - HC - Income Tax

Adjustment on sale of cylinders - Whether the Tribunal is right in deleting the prima facie adjustment made u/s 143(1)(a) in respect of sale of cylinders despite the clear provisions of section 43(6)(c)(B) of the Act Held that - The AO made the adjustments while processing the return u/s 143(1)(a) in respect of sale of cylinders at an amount of ₹ 16,66,800 - the assessee claimed 100 per cent depreciation on the cylinders, on sale of cylinders by reducing the same from plant and machinery - Tribunal had rightly held that at the issues with respect to the depreciation claimed by the assessee on the value of entire plant and machinery or on the value of each cylinders etc., are debatable issues and, as such, there are two views possible, and in such a situation, while processing return u/s 143(1)(a) of the Act, it was not open to the AO and or it was beyond the jurisdiction of the AO to make adjustment and consequently the adjustment made by the AO u/s 143(1)(a) of the Act has been set aside the order of the Tribunal is upheld Decided against revenue.

Issues:
1. Disallowance of excess claim of depreciation on cylinders under Section 143(1)(a) of the Income Tax Act.
2. Jurisdiction of the Assessing Officer to make adjustments under Section 143(1)(a) in relation to the sale of cylinders.
3. Interpretation of provisions of Section 43(6)(c)(B) of the Act regarding depreciation on cylinders.

Analysis:
1. The appellant-Revenue challenged the impugned judgment regarding the disallowance of excess claim of depreciation on cylinders under Section 143(1)(a) of the Income Tax Act for the A.Y. 1992-93. The dispute arose when the Assessing Officer increased the appellant's income by an amount related to the depreciation claimed on cylinders. The appellant contended that the deduction was inadmissible as per Section 43(6)(c)(B) of the Act, which required the sale value of assets to be reduced from the block of assets to which they belong. The AO's adjustment was based on this interpretation, leading to the appeal.

2. The Assessing Officer made adjustments under Section 143(1)(a) concerning the sale of cylinders, which was contested by the appellant. The appellant argued that the AO erred in not disallowing the excess claim of depreciation on cylinders, as it was not permissible under the Act. The Tribunal upheld the decision of the CIT(A) that the issue was debatable and beyond the scope of Section 143(1)(a). The appellant contended that the adjustment was justified based on the clear provisions of Section 43(6)(c)(B)(ii) of the Act.

3. The interpretation of Section 43(6)(c)(B) of the Act regarding depreciation on cylinders was a key aspect of the case. The appellant claimed that the Respondent-assessee should have reduced the sale value of cylinders from the block of assets eligible for 100% depreciation, not the block eligible for 25% depreciation. Both the CIT(A) and the Tribunal held that the issues related to depreciation on cylinders were debatable and that the AO's adjustments were beyond the limited jurisdiction of Section 143(1)(a). The courts found that two views were possible on the matter, leading to the dismissal of the appeal.

In conclusion, the High Court dismissed the appeal, upholding the decisions of the lower authorities. The Court found that the adjustments made by the Assessing Officer under Section 143(1)(a) regarding the depreciation on cylinders were beyond the scope of the Act. The Court emphasized that the issues surrounding the depreciation claimed on cylinders were debatable, and therefore, the adjustments were not permissible under Section 143(1)(a). The judgment favored the Respondent-assessee, and no costs were awarded in the case.

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