1985 (2) TMI 71 - AT - Income Tax

Summary

Issues:
1. Whether ship models purchased by the assessee can be treated as 'plant' for claiming depreciation under section 32 of the Income-tax Act, 1961.
2. Whether the ship models can be considered as 'furniture' for the purpose of claiming depreciation.

Analysis:
1. The judgment addresses the issue of whether ship models purchased by the assessee can be classified as 'plant' for depreciation under section 32 of the Income-tax Act, 1961. The definition of 'plant' includes apparatus used in carrying on a business. The tribunal concluded that ship models do not qualify as apparatus used for business operations and, therefore, cannot be considered 'plant' for depreciation purposes. Consequently, the claim for depreciation on the ship models as 'plant' was rejected.

2. The judgment further examines whether the ship models can be categorized as 'furniture' for depreciation purposes. The term 'furniture' is not explicitly defined in the Act, prompting a reference to dictionary meanings. The tribunal referred to definitions of 'furniture' as movable articles used for decoration or convenience in a place of business. It was established that the ship models, displayed in the office premises as showpieces related to the business, could be considered 'furniture'. The tribunal held that the ship models were directly connected to the business, symbolizing the nature of the business and having commercial use, thus qualifying as 'furniture' for depreciation purposes under section 32.

3. The judgment addresses the reasons provided by the Income Tax Officer (ITO) for rejecting the ship models' classification as 'furniture'. The ITO argued that ship models were not essential requirements for the office and had zero utility value for the business. However, the tribunal disagreed, emphasizing that the ship models were used for furnishing the office premises and had a direct connection to the business activities. The ITO's assertion that the ship models were not put to use and would not depreciate in value was refuted, with the tribunal highlighting that depreciation can be claimed based on factors like obsolescence and suitability over time. Ultimately, the tribunal set aside the lower authorities' orders and directed the ITO to allow depreciation on the ship models as 'furniture' used for the business purpose of furnishing the office premises.

4. The appeal was allowed in favor of the assessee, concluding that the ship models could be treated as 'furniture' for claiming depreciation under section 32 of the Income-tax Act, 1961.