2008 (12) TMI 172 - HC - Income Tax

Rate of Depreciation 100% depreciation on certain goods - The table includes energy saving device in the context and for the purpose of encouraging industries to adopt energy saving measures - While it was possible in the context of encouraging industrial activity to bring within the net of exemption manufacture of products which may even be remotely considered as paper but the same reasoning can not be adopted here - since the table indicates its intention to afford depreciation at the rates mentioned only to the specifically listed equipments - It is not even proved that a drier of the kind mentioned herein is an energy saving device tribunal is not correct to allow 100% depreciation on fluid bed drier.

Summary

Issues Involved:
1. Whether the fluid bed drier qualifies as an energy-saving device eligible for 100% depreciation under the Income-tax Rules.
2. Interpretation of the term "being" in the context of the depreciation table.

Detailed Analysis:

Issue 1: Eligibility of Fluid Bed Drier for 100% Depreciation
The primary question was whether the fluid bed drier qualifies as an energy-saving device eligible for 100% depreciation. The assessee claimed 100% depreciation on the fluid bed drier for the assessment year 1994-95, which was initially allowed but later challenged by the Revenue. The Revenue argued that the fluid bed drier is not listed as an energy-saving device in the depreciation table of the Income-tax Rules applicable for the assessment year 1988-89 to 2002-03.

The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal (ITAT) supported the assessee's claim, referencing a similar case, Asst. CIT v. Bijoy Nagar Tea Co. Ltd., where the ITAT, Calcutta B Bench, allowed 100% depreciation for a fluid bed drier. However, the High Court found the conclusion in Bijoy Nagar Tea Co. Ltd. unsatisfactory as it lacked a technical assessment of whether a fluid bed drier is energy efficient.

Issue 2: Interpretation of the Term "Being"
The court examined the interpretation of the term "being" in the context of the depreciation table. The Revenue contended that "being" should be construed as exhaustive, limiting the definition to the devices explicitly listed. The court reviewed several judgments to interpret similar terms like "that is to say" and "namely," which are generally considered exhaustive and not illustrative.

The court concluded that the term "being" in the depreciation table should be interpreted as "which are," meaning only the devices specifically listed qualify for the depreciation. The table explicitly mentions "specialised boilers and furnaces" but does not include "driers." The court noted that if driers were intended to be included, they would have been specifically mentioned, as seen with other devices like "solar crop driers" and "solar water heaters."

The court also examined the technical differences between boilers, furnaces, and driers. A boiler or furnace generates heat, while a drier removes moisture, which may not necessarily involve heat. The court found the assessee's supporting documents insufficient to prove that the fluid bed drier is an energy-saving device.

Conclusion:
The court ruled in favor of the Revenue, stating that the fluid bed drier does not qualify as an energy-saving device eligible for 100% depreciation under the Income-tax Rules. The order of the Income-tax Appellate Tribunal was set aside, and the appeal was allowed. The court emphasized that the depreciation table specifies the equipment eligible for depreciation, and the fluid bed drier is not included in that list.