1995 (3) TMI 13 - HC - Income Tax

Higher Rate Manufacture Or Production New Industrial Undertaking Rate Of Depreciation Special Deduction

Summary

Issues:
1. Depreciation claim for drilling equipment
2. Eligibility for tax relief under sections 80J, 80HH, and 80HHA

Depreciation Claim for Drilling Equipment:
The case involved an assessee firm engaged in drilling bore-wells claiming depreciation of 30% on rig and compressor for the assessment years 1981-82 and 1982-83. Initially, the Income-tax Officer allowed only 10% depreciation, contending that the assessee was not a "mineral oil concern." However, on appeal, the Commissioner of Income-tax (Appeals) granted 30% depreciation based on the Tribunal's judgment in the assessee's case for the assessment year 1979-80. This decision was upheld by the Tribunal and further confirmed by the High Court in a previous judgment. The court reiterated its earlier stance, ruling in favor of the assessee on this issue.

Eligibility for Tax Relief under Sections 80J, 80HH, and 80HHA:
The assessee also claimed to be an industrial undertaking eligible for relief under sections 80J, 80HH, and 80HHA of the Income-tax Act, 1961. The Income-tax Officer initially disallowed the claim, which was upheld by the Commissioner of Income-tax (Appeals). However, the Income-tax Appellate Tribunal deemed the assessee to be an industrial undertaking engaged in manufacturing or producing articles or things, thus qualifying for the said provisions. The matter was referred to the High Court, which analyzed previous judgments and reasoning. The court noted a Supreme Court decision stating that the benefit of investment allowance does not extend to new machinery employed in digging bore-wells. Consequently, the High Court ruled against the assessee, revoking the earlier judgment that drilling bore-wells constituted an industrial undertaking. The court held in favor of the Revenue on this issue, aligning with the Supreme Court's interpretation.

In conclusion, the High Court upheld the depreciation claim for drilling equipment but denied the eligibility for tax relief under sections 80J, 80HH, and 80HHA based on the recent Supreme Court decision. The judgment clarified the distinction between the two issues and provided a detailed analysis based on legal precedents and interpretations of relevant tax provisions.