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2011 (1) TMI 698 - HC - Income Tax100% Depreciation - centering and shuttering material - plant - use by the civil contractor - vallue not exceeding Rs. 5000 - rectification u/s 154 - Held that - shuttering is not an integrated component forming a plant. - Shuttering material is an integrated unit consisting of more than a few metal or wooden poles, planks and other props used to support the cement construction stage of a building. - a single unit of centering or shuttering material by itself -though durable-may not have functional value. - it is not possible to accept the plea of the assessees that each similar or dissimilar component or unit, forming part of the whole integrated shuttering material, is entitled for 100 per cent. depreciation as a plant. Rectification of mistake u/s 154 - Held that - A mixed question of fact and law, which has not been raised before the Tribunal, may in certain situations be permitted to be raised. But in this case no such plea was raised and we are afraid we cannot permit the assessee to raise this ground for the first time before us. - Decided against the assesee.
Issues Involved:
1. Exercise of power under section 154 of the Income-tax Act. 2. Higher rate of depreciation on vehicles used in contract works. 3. Depreciation on centering and shuttering material. Detailed Analysis: Exercise of Power Under Section 154 of the Income-tax Act The core issue concerns the rate of applicable depreciation on centering and shuttering material. The first minor question is whether the rectification is valid under section 154 of the Act. Section 154(1) confers power on income-tax authorities to amend any order to rectify any mistake apparent on record. This power is also conferred on the Income-tax Appellate Tribunal under section 254(2) of the Act. The Supreme Court in Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 clarified that the power under section 254(2) is not a power of review but to rectify any mistake apparent on record. In the present case, the assessment for the year 1993-94 was rectified twice by the Assistant Commissioner, reducing the depreciation on shuttering material from 100% to 25%. The Commissioner of Income-tax (Appeals) allowed the appeal, but the Tribunal reversed this decision, upholding the assessing authority's order. The Tribunal did not address the question of exercise of power under section 154(1) because the assessee did not raise this ground before it. As the Supreme Court's decision in Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 stands, the question is answered against the assessee. Higher Rate of Depreciation on Vehicles Used in Contract Works In I. T. T. A. No. 124 of 2005, the assessee claimed a higher rate of depreciation at 40% on vehicles hired out to Navayuga. The Assessing Officer disallowed this, stating that higher depreciation is available only for businesses running vehicles on hire, not for civil contractors. The Appellate Commissioner allowed the appeal, but the Tribunal agreed with the Assessing Officer. The Supreme Court in CIT v. Gupta Global Exim P. Ltd. [2008] 305 ITR 132 held that higher depreciation is admissible only if the assessee is in the business of hiring out trucks, not merely using them for their own business purposes. Thus, the Tribunal's decision stands, and the question is answered against the assessee. Depreciation on Centering and Shuttering Material The main issue is whether each component of centering and shuttering material qualifies as a "plant" eligible for 100% depreciation under the proviso to section 32(1)(ii) of the Act. The term "plant" includes anything used for business purposes. The definition and interpretation of "plant" have been discussed in various precedents, including CIT v. Taj Mahal Hotel [1971] 82 ITR 44 and CIT v. Sri Krishna Bottlers P. Ltd. [1989] 175 ITR 154 (AP). The court noted that shuttering material consists of various components used to support concrete structures temporarily. It is an integrated unit, and each component does not function independently. Therefore, the entire shuttering material should be considered as one plant. The Madras High Court in Alagendran Finance Ltd. [2003] 264 ITR 269 and the Rajasthan High Court in Mohta Construction Co. [2005] 273 ITR 276 had taken a contrary view, but this court was not persuaded by those opinions. The court concluded that each item of shuttering material cannot be treated as a separate plant eligible for 100% depreciation. The entire shuttering material forms one integrated unit and should be considered as one plant for depreciation purposes. Thus, the reference is answered in the negative against the assessee and in favor of the Revenue. Conclusion The court answered the reference in R. C. No. 116 of 1996 in the negative against the assessee and in favor of the Revenue. The appeal by the Commissioner of Income-tax, Visakhapatnam (I. T. T. A. No. 20 of 1999), was allowed, and the appeals by M/s. Navayuga Engineering Company Ltd. (I. T. T. A. Nos. 124 and 149 of 2005) were dismissed. No order was made as to costs.
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