1991 (11) TMI 92 - AT - Income Tax

Summary

Issues:
1. Allowance of depreciation, initial depreciation, and investment allowance on machinery for the extended accounting period.
2. Disputed installation and use of the machinery before the end of the extended accounting period.
3. Cancellation of interest charged under sections 215 and 139(8) after granting deductions.

Analysis:
1. The first issue revolves around the CIT(A) directing the ITO to allow depreciation, initial depreciation, and investment allowance on machinery purchased during an extended accounting period. The assessee changed its previous year from a calendar year to a financial year, resulting in a 15-month accounting period for the relevant assessment year. The ITO initially disallowed the deductions, suspecting the intention behind the change in the accounting year. However, the CIT(A) concluded that the machinery was indeed purchased, installed, and used before the end of the extended period, justifying the deductions.

2. The second issue concerns the disputed installation and use of the machinery within the extended accounting period. The Departmental Representative argued that the installation within a short timeframe was implausible, citing the weight and complexity of the machine. The CIT(A) relied on evidence provided by the assessee, including certificates and documents, to support the claim of timely installation. The Tribunal found the Department's contentions invalid, emphasizing that the asset's installation and readiness for use should qualify for full depreciation under the law.

3. The final issue pertains to the cancellation of interest charged under sections 215 and 139(8) post the allowance of deductions. The Department contended that interest should still apply, while the assessee argued that with the deductions granted, the interest provisions would no longer be applicable. The Tribunal agreed with the CIT(A)'s decision that post the deductions, no interest would be chargeable under the mentioned sections, directing the assessing authority to grant consequential relief.

In conclusion, the Tribunal dismissed the appeal, upholding the CIT(A)'s decision to allow the deductions on the machinery and cancel the interest charges under sections 215 and 139(8) after granting the deductions. The Tribunal found the CIT(A)'s reasoning and reliance on evidence to be valid, ensuring compliance with the relevant legal provisions regarding depreciation and interest charges.