1998 (4) TMI 72 - HC - Income Tax

Summary

Issues:
1. Whether contributions to Death Relief Fund and employees housing society are admissible deductions.
2. Whether higher depreciation should be allowed on plant and machinery coming into contact with corrosive chemicals.

Analysis:

Issue 1: Contributions to Death Relief Fund and Employees Housing Society
The first issue pertains to the admissibility of deductions for contributions made by the assessee towards the Death Relief Fund and the employees housing society. The court examined the contribution to the Death Relief Fund and noted that the employer's contribution matched that of the workmen, emphasizing the importance of maintaining a content workforce for efficient industrial functioning. The Income-tax Officer's narrow view, disallowing the claim due to lack of statutory obligation, was criticized for ignoring the welfare aspect. The court upheld the Commissioner of Income-tax's decision to allow the claim, stating that the contribution was a legitimate expenditure of revenue character. Similarly, the contribution to the employees housing society for road construction was deemed a legitimate welfare expenditure, supported by a Supreme Court precedent. The court concluded that both contributions were admissible deductions.

Issue 2: Higher Depreciation on Plant and Machinery
The second issue revolves around the allowance of higher depreciation on plant and machinery in a sugar factory coming into contact with corrosive chemicals. The respondent, a sugar mill operator, argued for a higher depreciation rate due to the corrosive nature of chemicals used in the manufacturing process. Previous claims for higher depreciation were allowed by the Tribunal but disallowed by the Revenue. The court referred to a prior case involving a similar claim and highlighted the lack of specific evidence regarding the machinery affected by corrosive chemicals. Consequently, the court directed the Tribunal to verify the corrosive nature of chemicals used in sugar production and identify the machinery in contact with such chemicals. Based on this verification, the court instructed the Tribunal to allow a higher rate of depreciation as warranted.

In conclusion, the judgment addressed the admissibility of deductions for contributions to welfare funds and the allowance of higher depreciation on machinery exposed to corrosive chemicals, providing detailed reasoning and directives for further verification by the Tribunal.