1988 (4) TMI 18 - HC - Income Tax

Summary

Issues:
1. Claim for higher depreciation allowance by a cooperative society for its seasonal factory.
2. Constitutionality of sub-item (iv) of item III of Appendix 1, Part 1, under rule 5 of the Income-tax Rules, 1962.
3. Whether the classification for depreciation allowance is discriminatory under Article 14 of the Constitution.
4. Entertaining writ applications without challenging orders in statutory forums.

Analysis:
The petitioner, a cooperative society engaged in sugar manufacturing, sought higher depreciation allowance for its seasonal factory. The dispute revolved around the interpretation of sub-item (iv) of item III of Appendix 1, Part 1, under rule 5 of the Income-tax Rules, 1962. The petitioner claimed that the refusal to allow higher depreciation was discriminatory and violated Article 14 of the Constitution. The key contention was whether the classification for depreciation on plant and machinery of seasonal factories was unreasonable. The court examined the legislative intent behind the classification and emphasized the burden on the petitioner to prove unreasonable discrimination.

The court referred to relevant provisions of the Income-tax Act, 1961, particularly Section 32 which allows deductions for depreciation on assets used for business purposes. The court analyzed the specific provision in sub-item (iv) of item III of Appendix 1, Part 1, which outlined the calculation of extra depreciation allowance for double and triple shift working in seasonal factories. The petitioner argued that the depreciation should be uniform for all types of factories, citing various decisions in support of their claim.

The court, however, found no direct applicability of the cited decisions to the present case. It highlighted the wide discretion of the legislative authority in taxation matters and the need for valid classification to justify differential treatment. The court emphasized the importance of proving unreasonable discrimination to challenge the constitutionality of a provision. It distinguished cases where statutes were struck down due to lack of consideration for relevant factors, which was not the situation in the present case.

Ultimately, the court dismissed the writ applications, ruling that the petitioner failed to demonstrate unreasonable discrimination in the classification for depreciation allowance. The judgment highlighted the need for substantial evidence to challenge the constitutionality of tax provisions and upheld the classification based on the nature and manner of use of plant and machinery in seasonal factories.