2012 (12) TMI 75 - HC - Income Tax

Rectification of mistake - Investment allowance - Section 32A alleged that the assessee had not used the plant and machinery for its business and the same was given on lease rent from 1991- 92 - Held that - Plant and machinery was hired out for a temporary period, which does not amount to transfer. Further the machinery was given on lease basis - On this ground the Assessing Officer in the original order had accepted the assessee s claim for investment allowance under Section 32A of the Act - such issue being debatable, the order could not have been varied in exercise of powers under Section 154 of the Act read with Section 155(4A) of the Act in favor of assessee

Summary

Issues:
1. Appeal against Tribunal's judgment on depreciation under Section 32A of the Income Tax Act.
2. Validity of Assessing Officer's withdrawal of depreciation benefit under Section 154.
3. Tribunal's decision on the debatable issue of machinery transfer and leasing.

Analysis:
1. The first issue in this case revolves around the appeal filed by the Revenue against the Tribunal's decision regarding the depreciation claimed by the assessee under Section 32A of the Income Tax Act. The Tribunal allowed the appeal on the grounds that the issue was debatable and could not be rectified under Section 154 of the Act. The Tribunal also noted that the machinery in question was transferred by way of leasing within 8 years after installation, a transaction not conducted in the relevant assessment year.

2. The second issue concerns the validity of the Assessing Officer's withdrawal of the depreciation benefit initially granted to the assessee under Section 32A. The Assessing Officer, through a notice under Section 154, revoked the depreciation benefit that had been accepted in the original assessment for the year 1995-96. The CIT(A) dismissed the appeal against this decision, leading to the matter being brought before the Tribunal.

3. The final issue pertains to the Tribunal's analysis of the machinery transfer and leasing arrangement. The Revenue argued that the assessee had transferred the plant and machinery within 4 years of installation, thereby disqualifying them from claiming continued deduction under Section 32A. However, the Tribunal found that the original assessment order acknowledged the machinery being hired out temporarily, not constituting a transfer. Moreover, the machinery was leased out, leading the Assessing Officer to accept the investment allowance claim initially. The Tribunal concluded that this issue was debatable and could not be altered under Section 154 of the Act, ultimately dismissing the Tax Appeal.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the debatable nature of the issue and the Assessing Officer's initial acceptance of the investment allowance claim. The Court found no legal question warranting intervention and dismissed the Tax Appeal.