2016 (6) TMI 562 - HC - Income Tax

Allowability of depreciation - whether the Appellate Tribunal was right in allowing the depreciation disallowed on Pollution Control Equipments interpreting the word being used in Appendix-I of the I.T.Rules as illustrative in nature, ignoring the fact that the assets eligible for depreciation @ 100% are specifically included under the head Water Pollution Control Equipments and that except the assets mentioned in (IA), (2) and (3) of Item No.III of Appendix-A, the remaining Plants & Machineries are eligible for depreciation @ 25% ? - Held that - Tribunal has rightly considered the opinion of the expert, which was placed on record and held that the equipments which are used are integral part of the plant. Therefore, the Tribunal has rightly allowed the appeal by reversing the view of both the lower authorities. If the authorities were not agreeable with the opinion of the expert, then appropriate procedure should have been followed, which is not followed in the present case. In view of this, the view taken by the Tribunal is correct and the question posed for our consideration is answered against the department and in favour of the assessee and it is held that the depreciation allowed by the Tribunal is just and proper and no interference is called for in the present appeal. - Decided against revenue.

Summary

Issues:
Challenge to depreciation disallowed on Pollution Control Equipments.

Analysis:
The appellant challenged the judgment of the Income Tax Appellate Tribunal regarding the disallowance of depreciation on Pollution Control Equipments. The substantial question of law framed by the Court was whether the Tribunal was correct in allowing the depreciation disallowed on Pollution Control Equipments. The Assessing Officer disallowed depreciation on certain assets claimed by the assessee as pollution control equipment, stating they did not fit the criteria for 100% depreciation as per IT rules. The General Manager (Technical) provided a report detailing the assets eligible for 100% depreciation. The CIT (Appeals) upheld the disallowance, stating that assets not strictly covered under the 100% depreciation block should not be allowed. The Tribunal considered the expert opinion and held that the equipment used was an integral part of the plant, reversing the lower authorities' views. The Tribunal's decision was based on expert opinion and was upheld by the High Court, dismissing the appeal and affirming the depreciation allowed on Pollution Control Equipments.

The appellant argued that the Tribunal erred in partially accepting the expert opinion and that depreciation should not have been allowed on assets not specifically mentioned under Water Pollution Control Equipments. The respondent cited a previous court decision to support their position, emphasizing that assets not falling under specified categories should not be eligible for depreciation. The Tribunal's decision was based on expert opinion and the integral role of the equipment in the plant, leading to the reversal of lower authorities' decisions. The High Court upheld the Tribunal's decision, stating that if the authorities disagreed with the expert opinion, proper procedures should have been followed. The Court found the Tribunal's decision appropriate and dismissed the appeal, affirming the depreciation allowed on Pollution Control Equipments.

In conclusion, the High Court upheld the Tribunal's decision to allow depreciation on Pollution Control Equipments based on expert opinion and the integral role of the equipment in the plant. The Court dismissed the appeal, affirming the correctness of the depreciation allowed and finding no grounds for interference.