2017 (1) TMI 1002 - HC - Income Tax

Depreciation claim - whether shuttering be treated to be part of plant and will be entitled for 100% deduction or less than that? - Held that - If statute permitting depreciation at a particular rate itself has been amended and such amendment is applicable to disputed period of assessment, it is a substantial question of law and can be raised before this Court but since it may also involve some factual investigation, we find it appropriate to remand this matter to Tribunal to look into this aspect and pass a fresh order in accordance with law. In view of above, appeal is allowed partly. Impugned order dated 30.04.2015 is modified only to the extent that parties shall be allowed to address Tribunal on aforesaid question and after giving opportunity of hearing to both parties, Tribunal shall decide such question in accordance with law, expeditiously.

Issues Involved:
1. Whether shuttering should be treated as part of the plant and entitled to 100% deduction or less.
2. Applicability of depreciation rates as per amended statute.

Issue-Wise Detailed Analysis:

1. Treatment of Shuttering as Part of Plant:
The primary dispute revolves around whether shuttering qualifies as part of the plant under the Income Tax Act, 1961, and thus, whether it is eligible for 100% depreciation deduction. The appellant's counsel, Sri Manish Misra, argued that under Section 32(1) of the Act, all depreciations are provided for buildings, machinery, plant, or furniture, being tangible assets. The respondent's counsel, Sri Pradeep Agarwal, did not directly address this issue but focused on procedural aspects.

2. Applicability of Depreciation Rates:
Sri Manish Misra pointed out that Section 32 of the Act, read with Rule 5 of the Income Tax Rules, 1962, specifies the depreciation rates. He emphasized that Appendix 1, substituted by the Income Tax (Sixth Amendment) Rules, 2005, effective from Assessment Year 2006-07, prescribes a 15% depreciation rate for machinery and plant, excluding certain sub-items. He argued that the amendment is applicable to the disputed assessment period (2010-11), and therefore, only 15% depreciation should be admissible.

Procedural Considerations:
Sri Pradeep Agarwal contended that the issue of the amended depreciation rate was not raised before the Tribunal and should not be introduced for the first time at the High Court level. However, the court found that if the statute, as amended, mandates a specific depreciation rate applicable to the assessment period in question, it constitutes a substantial question of law that can be raised before the court. The court acknowledged that this might involve factual investigation and thus decided to remand the matter to the Tribunal for fresh consideration.

Court's Order:
The High Court allowed the appeal partly, modifying the impugned order dated 30.04.2015. The court directed the Tribunal to permit the parties to address the issue of the applicable depreciation rate and to decide the matter in accordance with the law after providing an opportunity for hearing to both parties. The Tribunal is expected to pass a fresh order expeditiously.

Conclusion:
The judgment primarily addresses the applicability of the amended depreciation rates to shuttering and the procedural propriety of raising such issues at the High Court level. The matter was remanded to the Tribunal for a detailed examination and resolution in accordance with the amended statutory provisions.

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