1978 (1) TMI 19 - HC - Income Tax

Summary

Issues involved:
The judgment addresses two main issues: 1. Whether the assessee was entitled to depreciation and development rebate on the cost of digging a well. 2. Whether the appeal against the order of the ITO giving effect to the directions given by the AAC is maintainable.

Issue 1: Depreciation and development rebate on digging a well
The assessee, a pharmaceutical company, spent a sum for digging a well in its factory for business purposes. The ITO disallowed the claim for depreciation and development rebate on the ground that a well does not fall under the definition of "plant". The AAC granted the rebate, which was challenged by the revenue in appeal. The Tribunal upheld the AAC's decision, stating that the well was dug for business purposes. The Tribunal applied the Supreme Court's decision in CIT v. Taj Mahal Hotel to support its conclusion. The revenue contended that a well does not qualify as "plant" under Section 32 of the Income Tax Act. However, the court held that the definition of "plant" is broad and includes items necessary for business operations, such as the well in this case. The court referred to previous decisions to support this interpretation and ruled in favor of the assessee.

Issue 2: Appeal against ITO's order
The revenue also challenged the appealability of the ITO's order giving effect to the AAC's directions. The Tribunal held that an order made in compliance with the directions of the appellate authority is appealable. The court affirmed this position, stating that when the ITO revises the assessment as directed by the AAC, the resulting order is indeed appealable. Therefore, the court answered both questions in the affirmative, against the revenue, and awarded costs to the assessee.