1979 (2) TMI 74 - HC - Income Tax

Carry Forward Rate Of Depreciation Return Disclosing Loss Revenue Expenditure Sugar Factory

Summary

Issues:
1. Entitlement to carry forward business loss filed after the prescribed period.
2. Entitlement to depreciation on the cost of rollers as revenue deduction.

Analysis:
1. The first issue pertains to the entitlement of the assessee to carry forward a business loss determined by the Income-tax Officer after the expiry of the prescribed period. The court found that this issue was unnecessary to delve into as it was concluded in favor of the assessee by a previous decision of the Supreme Court. Therefore, the court agreed that the answer to this question should be in the affirmative and in favor of the assessee.

2. The second issue revolves around the entitlement of the assessee to claim depreciation on the cost of rollers as a revenue deduction. Initially, the Income Tax Officer (ITO) did not allow depreciation on the rollers, stating that the assessee was not entitled to it as per the Schedule. The assessee contended that since the rollers were installed along with the machinery for the first time, they should be eligible for depreciation. The assessee's argument was accepted by the Appellate Assistant Commissioner (AAC), who directed the ITO to allow depreciation at a rate of 9% on the cost of the rollers included in the plant and machinery. However, the Income-tax Appellate Tribunal reversed this decision, stating that the rollers were detachable from the machinery and, as per the Schedule, no depreciation was provided for them.

3. The court analyzed the Schedule under Rule 8 of the Indian Income Tax Rules, which specified a nil rate of depreciation for rollers used in sugar works. The court noted that under the new rules, a 100% rate of depreciation was prescribed for such items, rectifying the issue faced by the assessee. Despite the economic logic behind the assessee's claim, the court held that the language of the Schedule must be adhered to, and no depreciation could be allowed on the rollers until they were replaced. The court agreed with the Tribunal's decision to reject the claim for depreciation, emphasizing that the rollers were part of the machinery for which no depreciation was provided until replacement.

4. In conclusion, the court answered the questions as follows: Question 1 in the affirmative and in favor of the assessee based on the Supreme Court decision, and Question 2 in the negative and in favor of the revenue, aligning with the Tribunal's decision. The parties were directed to bear their own costs of the reference.