1988 (3) TMI 25 - HC - Income Tax

Summary

Issues:
- Claim of depreciation at 15% for plant and machinery
- Reopening of assessments under section 148
- Entitlement to higher depreciation rate based on contact with corrosive chemicals
- Validity of proceedings and claim for depreciation

Analysis:
The judgment pertains to an appeal by an assessee, a public company engaged in sugar manufacturing, regarding the depreciation rate for its plant and machinery for the assessment years 1976-77, 1977-78, and 1978-79. The initial claim for depreciation at 15% was challenged by the Income-tax Officer during reassessment under section 148, asserting that the correct rate should be 10%. The assessee contended that its machinery came into contact with corrosive chemicals, justifying the higher depreciation rate. The Tribunal upheld the Income-tax Officer's decision, citing a lack of evidence proving contact with corrosive chemicals and referencing a similar case from the Punjab and Haryana High Court. The assessee sought a reference to the High Court under section 256(1).

The High Court emphasized that the issue of contact with corrosive chemicals is a factual matter, requiring the assessee to provide evidence to support the claim for higher depreciation. It was noted that the assessee failed to present detailed information on how corrosive chemicals interacted with its machinery, relying instead on the Punjab and Haryana High Court decision without establishing the specific circumstances of its case. Despite the assessee's argument that sulphuric acid mixed with cane juice came into contact with the machinery, the High Court found no substantiated basis for this claim. The Income-tax Officer's and Tribunal's findings, based on the lack of evidence of contact with corrosive chemicals, were deemed factual and not a legal issue.

The High Court concluded that even if the matter were considered a legal question, the Tribunal's decision aligning with the Income-tax Officer was correct. The absence of concrete evidence supporting the claim for higher depreciation rate rendered the assessee's argument unsubstantiated. Consequently, the High Court ruled in favor of the Revenue, denying the assessee's claim for depreciation at 15%. The judgment highlighted the importance of factual evidence in tax assessments and upheld the Tribunal's decision based on the lack of proof regarding contact with corrosive chemicals.