9911796707
|
Home
Issues:
1. Entitlement to depreciation at a higher rate of 15% for furnaces used in manufacturing Ferro-silicon and Pig Iron. 2. Interpretation of applicable depreciation rules under the IT Act 1961. 3. Comparison of the current case with a previous judgment by the Punjab and Haryana High Court regarding corrosive substances and machinery. 4. Assessment of whether the furnaces qualify as machine tools for depreciation purposes. 5. Determination of the nature of the business of the assessee, specifically smelting versus melting. Analysis: 1. The appeal was filed by the assessee against the CIT's order under section 263 of the IT Act, challenging the denial of depreciation at a higher rate of 15% for furnaces used in manufacturing Ferro-silicon and Pig Iron. The CIT contended that the furnaces were only eligible for depreciation at 10%, citing a previous judgment by the Punjab and Haryana High Court. The assessee argued that the furnaces came into contact with corrosive substances during the manufacturing process, justifying the higher depreciation rate. 2. The CIT based the decision on the change in Depreciation Schedule from industry-wise to varying rates for different types of machines effective from April 1, 1970. The assessee claimed that the furnaces should be considered as machine tools under specific entries in the Depreciation Schedule, allowing for the higher depreciation rate. The CIT, however, rejected this argument and directed the ITO to allow depreciation at 10% only, leading to the appeal. 3. The assessee presented evidence that the imported furnaces required fire clay brick linings to prevent corrosion due to the high temperatures and corrosive nature of the materials used in the smelting process. The contention was made that the furnaces indeed came into contact with corrosive chemicals, justifying the higher depreciation rate of 15%. 4. The comparison with the Punjab and Haryana High Court judgment highlighted the distinction in the nature of corrosive substances and their interaction with machinery. The assessee argued that the facts of the current case differed significantly from the precedent cited, emphasizing the corrosive nature of the substances involved in the manufacturing process. 5. The Tribunal analyzed the nature of the assessee's business, noting that it involved smelting rather than melting. The furnaces used were capable of generating extremely high temperatures, causing the ores to react with limestones and release corrosive gases like sulphur and phosphorus. The Tribunal concluded that the furnaces did come into contact with corrosive chemicals, justifying the entitlement to depreciation at the higher rate of 15%. Consequently, the CIT's order was set aside, and the appeal was allowed.
|
