1980 (9) TMI 38 - HC - Income Tax

Summary

Issues:
1. Depreciation allowance on ice plant machinery for assessment year 1970-71.
2. Deductibility of interest payment to M/s. National Small Industries Corporation Ltd. for assessment year 1970-71 under section 37(1) of the Income-tax Act, 1961.

Analysis:
1. The first issue pertains to the allowance of depreciation at the rate of 15% on ice plant machinery valued at Rs. 3,84,132 for the assessment year 1970-71. The assessee claimed this depreciation, which was initially disallowed by the Income Tax Officer (ITO) on the grounds that the machinery did not fall under the category of "refrigeration plants." However, the Appellate Tribunal reversed this decision, holding that the term "refrigeration" encompassed the machinery in question. The High Court concurred with the Tribunal's interpretation, citing various sources like Webster's Dictionary and Encyclopaedia Britannica to support the broader understanding of refrigeration technology. The court ruled in favor of the assessee, allowing the depreciation at the rate of 15%.

2. The second issue concerns the deductibility of interest payment amounting to Rs. 24,532 to M/s. National Small Industries Corporation Ltd. for the assessment year 1970-71 under section 37(1) of the Income-tax Act, 1961. The ITO had disallowed a portion of the interest claim, contending that only a specific loan amount related to the assessee's business. However, the Tribunal disagreed with this assessment and allowed a higher deduction for interest paid. The High Court upheld the Tribunal's decision, emphasizing that the interest deduction was permissible based on the facts and circumstances of the case. It rejected the revenue's argument that interest on machinery purchased on hire purchase basis was not allowable, distinguishing it from a precedent where machinery was not actually purchased. Consequently, the court ruled in favor of the assessee, affirming the deduction of interest amounting to Rs. 28,511.

In conclusion, the High Court ruled in favor of the assessee on both issues, allowing the depreciation on ice plant machinery and upholding the deductibility of interest payment to M/s. National Small Industries Corporation Ltd. for the assessment year 1970-71.