1966 (2) TMI 88 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal erred in law in declining to permit the assessee to argue its claim to depreciation allowance under section 12(3) of the Income-tax Act.
2. Whether the company is entitled in law to depreciation on the machinery purchased from Messrs. Laxmiratan Engineering Works Ltd. under section 12(3) in the present case.

Issue-wise Detailed Analysis:

1. Whether the Tribunal erred in law in declining to permit the assessee to argue its claim to depreciation allowance under section 12(3) of the Income-tax Act:
The Tribunal initially refused to allow the assessee to argue for depreciation under section 12(3) on the grounds that this contention was not raised before the Income-tax Officer or the Appellate Assistant Commissioner and was considered an after-thought. The Tribunal also stated that relevant facts for this contention needed to be investigated. However, the High Court found this reasoning flawed. It emphasized that the facts relevant to section 12(3) - ownership of the machinery and its lease to another party - had been consistently pleaded by the assessee. The Tribunal's refusal to consider the claim under section 12(3) was deemed unjustified, as the assessee was not making a new case but merely invoking a different provision of the law on the same set of facts. The appellate powers of the Tribunal are broad, allowing it to decide on questions of both fact and law, provided the parties have an opportunity to be heard. The High Court concluded that the Tribunal should have considered the claim under section 12(3) based on the existing record without requiring additional evidence. Thus, the High Court answered the first question in the affirmative, indicating that the Tribunal erred in not permitting the assessee to argue under section 12(3).

2. Whether the company is entitled in law to depreciation on the machinery purchased from Messrs. Laxmiratan Engineering Works Ltd. under section 12(3) in the present case:
Given the affirmative answer to the first question, the High Court did not directly address the second question. The Tribunal had noted that the question assumed the fact that the machinery was purchased from L.R.E. Works, which needed verification. Both parties agreed that the Tribunal should decide this question based on the material already on record. Therefore, the High Court refrained from answering the second question and directed the Tribunal to consider it on the existing evidence.

Conclusion:
The High Court affirmed that the Tribunal erred in not allowing the assessee to argue its claim for depreciation under section 12(3). The second question regarding the entitlement to depreciation under section 12(3) was left to the Tribunal to decide based on the material before it. The Commissioner was ordered to pay the costs of the assessee, while the assessee was to bear the costs of the notice of motion.