2019 (2) TMI 724 - HC - Income Tax

Additional depreciation on acquisition and installation of machines to be made after 31st March, 2002 - as per Tribunal additional depreciation was wrongly allowed by AO as the assessee although purchased the assets before 1.4.2002 but the assets were admittedly installed after 1.4.2002 - Held that - The reasons sought to be advanced by the tribunal, regrettably show absolute non-application of mind. Where evidence is cited in support of proof of a fact the exact materials on which such inference is being drawn have to be specified. After all, the tribunal is the final fact finding authority. Saying all the documents will be found in the paper book amounts to dealing with the matter very cursorily. The factum of sale/acquisition of the machines has to be proved legally in terms of payment of consideration, date of delivery, passing of property, the terms and conditions of contract etc. The installation of the assets has also to be established in a like manner. In our opinion, such absence of reasons on a factual issue in the order of the tribunal which is the final authority on facts is itself a substantial question of law from which an appeal lies to the High Court under Section 260A of the Income Tax Act. Otherwise, a party would be deprived of remedy. That part of the order of the tribunal dealing with additional depreciation is set aside. The tribunal is directed to re-hear the parties on the above issues and pronounce a fresh order within 6 months from the date of communication of this order.

Summary

Issues:
- Interpretation of Section 32(1)(iia) of the Income Tax Act regarding additional depreciation.
- Discrepancy in the treatment of assets acquired before 31st March, 2002 but installed after that date.
- Lack of adequate reasoning and evidence evaluation by the tribunal in allowing additional depreciation.
- Requirement for the tribunal to re-hear the parties and issue a fresh order within a specified timeframe.

Analysis:
The primary issue in this case revolved around the interpretation of Section 32(1)(iia) of the Income Tax Act, which allowed for additional depreciation on the acquisition and installation of machines post 31st March, 2002. The crux of the matter was whether the machines had to be both acquired and installed after 1st April, 2002, for the additional depreciation to be applicable. The Commissioner of Income Tax contended that the additional depreciation of ?5,61,23,019/- was wrongly allowed as the machines were purchased before 31st March, 2002 but installed after that date.

The tribunal's order dated 30th October, 2007, presented a conflicting view, disagreeing with the Commissioner's stance. The tribunal noted that the assets were indeed purchased before 1st April, 2002, but it allowed the additional depreciation claim based on the evidence and documents provided by the assessee. However, the High Court found the tribunal's reasoning lacking, emphasizing the necessity for detailed evaluation and specific mention of evidence when drawing inferences. The tribunal's failure to provide adequate reasons on factual issues was deemed a substantial question of law, warranting an appeal to the High Court under Section 260A of the Income Tax Act.

Consequently, the High Court set aside the part of the tribunal's order related to additional depreciation and directed a rehearing of the parties on the issues at hand. The tribunal was instructed to issue a fresh order within six months from the date of communication of the High Court's directive. This decision aimed to rectify the deficiencies in the tribunal's reasoning process and ensure a more thorough evaluation of the evidence presented by the parties before reaching a conclusion.