1996 (5) TMI 48 - HC - Income Tax

Summary

Issues:
Claim for extra depreciation and investment allowance for dumpers not initially made before the Income-tax Officer but raised before the Commissioner of Income-tax in proceedings under section 263 of the Income-tax Act.

Detailed Analysis:
The case involved a dispute regarding the claim for depreciation on dumpers owned by the assessees who derived income from owning mines and selling stones. The Income-tax Officer treated the dumpers as road vehicles and allowed depreciation at 40%. However, the Commissioner of Income-tax invoked powers under section 263, determining that the dumpers were earthmoving machinery eligible for 30% depreciation under specific provisions. The assessee contended that dumpers were used for mining purposes and thus entitled to initial depreciation and investment allowance under relevant sections of the Income-tax Act.

The Income-tax Appellate Tribunal ruled in favor of the assessee, allowing the revision of the claim for depreciation on new machinery under section 32(1)(iia). The Tribunal held that since the Commissioner found dumpers not equivalent to road transport vehicles, the assessee could revise the claim. However, the claim for investment allowance was not upheld.

The issue revolved around whether the assessee could claim extra depreciation when not initially included in the return. The court cited precedents to support the assessee's right to claim deductions in reassessment proceedings even if not raised during the original assessment. The court also examined relevant provisions of the Income-tax Rules to determine the correct rate of depreciation for the dumpers.

The court emphasized that if an item is considered for depreciation under a specific entry but later found to fall under a different category, the assessee is entitled to the consequential benefits, even if not initially claimed. The court concluded that the Income-tax Appellate Tribunal was justified in directing the Income-tax Officer to allow extra depreciation and investment allowance for dumpers, despite the claim not being raised before the Income-tax Officer but during proceedings under section 263.

In summary, the court ruled in favor of the assessee, emphasizing the right to claim deductions in reassessment proceedings and the entitlement to benefits based on the correct categorization of assets for depreciation purposes.