2005 (7) TMI 77 - HC - Income Tax

Extra shift depreciation allowance on the leased out assets - whether the Tribunal was right in upholding the order of the Commissioner of Income-tax (Appeals) disallowing extra shift allowance and additional depreciation on the assets leased out by the assessee? - authorities below rejected this claim on the ground that since the assessee had leased out the assets it could not be said that it used the assets itself. - Since provision of section 32A(7) has not been looked into by the Tribunal or the lower authorities the Commissioner of Income-tax (Appeals) will consider the assessee s claim in respect of section 32A(7) also. - impugned judgments of the Tribunal and the Commissioner of Income-tax (Appeals) are set aside and the matter is remanded to the Commissioner of Income-tax (Appeals) to pass a fresh order in accordance with law

Summary

Issues:
1. Disallowance of extra shift allowance and additional depreciation on leased assets.
2. Applicability of section 32A(7) of the Income-tax Act.

Analysis:

Issue 1: Disallowance of extra shift allowance and additional depreciation on leased assets
The High Court considered whether the Tribunal was correct in upholding the order of the Commissioner of Income-tax (Appeals) disallowing extra shift allowance and additional depreciation on assets leased out by the assessee. The assessee, a public limited company, claimed these allowances on leased assets for the relevant assessment year. The lower authorities rejected the claim stating that since the assets were leased out, the assessee did not use the assets itself. The High Court referred to a previous decision where it was held that the lessor is entitled to extra shift and additional depreciation allowance on leased assets. The court found that there was no evidence in the orders of the lower authorities to prove whether the lessee had actually worked multiple shifts. Therefore, the High Court set aside the impugned orders and remanded the matter to the Commissioner of Income-tax (Appeals) to determine if the lessee had indeed worked multiple shifts, which would entitle the assessee to the claimed allowances.

Issue 2: Applicability of section 32A(7) of the Income-tax Act
In one of the appeals, the appellant raised the issue of the applicability of section 32A(7) of the Income-tax Act. The Tribunal had rejected the appeal based on a different decision that did not consider section 32A(7). Since this specific provision was not addressed by the Tribunal or the lower authorities, the High Court directed the Commissioner of Income-tax (Appeals) to consider the assessee's claim regarding section 32A(7) in the fresh order to be passed. The High Court allowed the appeals, set aside the judgments of the Tribunal and the Commissioner of Income-tax (Appeals), and remanded the matter for a new decision in line with the court's observations and the law.

In conclusion, the High Court's judgment addressed the issues of disallowance of extra shift allowance and additional depreciation on leased assets, as well as the applicability of section 32A(7) of the Income-tax Act. The court emphasized the need for evidence regarding the lessee's multiple shifts and directed a fresh consideration of the claims in light of the relevant legal provisions.