2015 (1) TMI 700 - HC - Income Tax

Depreciation claimed on the cylinders - asset not in use in the previous year - Tribunal allowed the claim - Held that - Tribunal has considered the decision in the case of Pepsu Road Transport Corporation (2001 (9) TMI 65 - PUNJAB AND HARYANA High Court ) and was justified in in coming to the conclusion that that cylinders are business assets of the assessee and are to be first filled with gas and sending these cylinders for the purpose of filling of gas itself is for the purpose of business. Thus considering the facts of the present case wherein the gas cylinders were used for business purpose as when needed, we find that the Tribunal has rightly considered that as the cylinders were filled and kept ready for use of business purpose, depreciation ought to have been allowed. - Decided in favour of the assessee. Addition made on account of closing stock - Tribunal deleted the addition - Held that - As relying on ALLIANCE INDUSTRIES Versus INCOME TAX OFFICER 2014 (11) TMI 935 - GUJARAT HIGH COURT we answer the question in favour of the assessee. - Decided in favour of the assessee.

Summary

Issues:
1. Disallowance of depreciation on cylinders not in use.
2. Addition made on account of closing stock.

Analysis:

Issue 1: Disallowance of Depreciation on Cylinders Not in Use
The appellant, a company engaged in manufacturing distillery and alcohol-based chemical plant, filed an appeal against the disallowance of depreciation on cylinders and an addition on account of stock difference. The Tribunal allowed the appeal, leading to the current appeal by the revenue. The revenue argued that the cylinders were not actually put to use before a specific date, citing a Karnataka High Court decision. However, the respondent's advocate supported the Tribunal's order, referring to various decisions. The High Court analyzed the facts and concluded that the Tribunal rightly allowed depreciation on the cylinders. The Court emphasized that even constructive or passive use qualifies for depreciation. The Court cited the case of Pepsu Road Transport Corporation to support its decision. Ultimately, the Court ruled in favor of the assessee, upholding the Tribunal's decision.

Issue 2: Addition Made on Account of Closing Stock
Regarding the addition made on account of closing stock, the Court relied on a previous decision in the case of Alliance Industries vs. Income Tax Officer. Citing another Supreme Court decision, the Court ruled in favor of the assessee, aligning with the previous judgment. Consequently, the Court dismissed the appeal and upheld the Tribunal's decision to allow the depreciation claimed on the cylinders and delete the addition made on closing stock. The Court affirmed that the impugned order by the Tribunal was valid and correctly decided.

In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the assessee on both issues raised in the appeal. The Court found the Tribunal's reasoning sound and in accordance with the law, leading to the dismissal of the appeal by the revenue.