1997 (8) TMI 66 - HC - Income Tax

Summary

Issues:
Interpretation of the Depreciation Table - Whether the aircraft owned by the assessee falls under item D(1) or item E(1) of the Depreciation Table for depreciation calculation.

Analysis:
The High Court of Bombay addressed two Income-tax Reference cases pertaining to the same assessee concerning the depreciation rate for an aircraft owned by the company. The controversy revolved around whether the aircraft should be classified under item D(1) or item E(1) of the Depreciation Table appended to the Income-tax Rules, 1962. The Assessing Officer initially categorized the aircraft under item D(1) for 30% depreciation, but the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal ruled in favor of the assessee, allowing 40% depreciation under item E(1).

The court considered arguments from both sides, where the Revenue contended that the aircraft should be depreciated at 30% under item D(1) since it was specifically mentioned, while the assessee's counsel argued that the aircraft, being "heavier-than-air," should be classified under item E(1) for 40% depreciation. The court analyzed the definitions of "aircraft" and "aero-engines," emphasizing the distinction between the two types of machinery. An aircraft was defined as a machine capable of flight, while an aero-engine was described as the power unit of an aircraft.

The court referred to the Depreciation Table items D(1) and E(1), highlighting that item D(1) applied to aircraft and aerial photographic apparatus, whereas item E(1) pertained to aero-engines. The judgment emphasized that all aircraft, whether lighter-than-air or heavier-than-air, are considered aircraft and not aero-engines. The court cited various sources, including the Aircraft Act, 1934, and scientific dictionaries, to support the broad definition of aircraft encompassing all mechanically driven flying machines.

Ultimately, the court concluded that the aircraft in question should be classified under item D(1) of the Depreciation Table, entitling it to 30% depreciation, and not under item E(1) for 40% depreciation as claimed by the assessee. The judgment favored the Revenue, rejecting the assessee's interpretation and answering both references in the negative. No costs were awarded in the matter.

This detailed analysis by the High Court of Bombay provides a comprehensive understanding of the interpretation of the Depreciation Table in the context of aircraft classification for depreciation purposes, clarifying the distinction between aircraft and aero-engines based on legal definitions and industry standards.