2004 (7) TMI 50 - HC - Income Tax

Whether on its interpretation of the proviso to section 32(1)(ii), the Tribunal was legally justified in holding each individual shuttering as machinery or plant for the purpose of allowing 100 per cent, depreciation to the extent of Rs. 2,21,430 to the assessee whereas only a depreciation of 331/3 per cent, was held allowable by the Assessing Officer on such integrated unit of plant and machinery in the case? - Shuttering being a necessary component for construction of the building, is a plant and each shuttering in itself is an independent unit, as that depends upon the use of shuttering in different places and each shuttering is costing less than Rs. 5,000, therefore, as per the rules, if the cost of the plant is less than Rs. 5,000, that plant is entitled for 100 per cent, depreciation. - we see no reason to interfere in the impugned order

Summary

Issues:

1. Interpretation of the proviso to section 32(1)(ii) regarding depreciation on shuttering as machinery or plant.

Analysis:

The case involved a question regarding the interpretation of the proviso to section 32(1)(ii) of the Income Tax Act concerning the allowance of depreciation on shuttering as machinery or plant. The assessee, engaged in construction work, acquired shuttering work worth Rs. 2,21,430 and claimed 100% depreciation on each unit of shuttering as the cost of each unit was less than Rs. 5,000. The Assessing Officer, however, allowed only a depreciation of 331/3 per cent on the integrated unit of plant and machinery. The Tribunal upheld the assessee's claim for 100% depreciation on each shuttering unit, considering it as a necessary component for construction work without which the work cannot be executed.

The Tribunal's decision was challenged, citing the decision of the Allahabad High Court where shuttering was treated as plant, and depreciation was allowed. The High Court agreed with this view, emphasizing that shuttering is essential for construction work and is considered a plant. Each shuttering unit was deemed an independent unit costing less than Rs. 5,000, making it eligible for 100% depreciation as per the rules. The Court found no reason to interfere with the Tribunal's decision and ruled in favor of the assessee, holding that each shuttering unit qualifies for 100% depreciation under the specified provisions.

Therefore, the High Court answered the question in the affirmative, favoring the assessee and rejecting the Department's contention. The reference was disposed of accordingly, upholding the Tribunal's decision to allow 100% depreciation on each shuttering unit as machinery or plant for the purpose of taxation.