1986 (6) TMI 71 - AT - Income Tax

Summary

Issues:
1. Allowance of depreciation on energized tubewell.
2. Deduction for interest on delayed payment of municipal tax.
3. Entertaining appeal related to charging of interest under sections 139(8) and 215 of the Act.

Issue 1: Allowance of Depreciation on Energized Tubewell:
The assessee, a private limited company, claimed depreciation on a tubewell sunk in its building for the tenants' water supply. The Income Tax Officer (ITO) and Commissioner (Appeals) denied the depreciation. The department argued that depreciation is only available for assets used for business or profession. The Tribunal agreed, stating depreciation is allowed for assets owned, used for business, or profession. As the tubewell wasn't used for business or profession, depreciation was disallowed.

Issue 2: Deduction for Interest on Delayed Payment of Municipal Tax:
The assessee sought deduction for interest paid on delayed municipal tax payment, claiming it as part of the tax under section 23(1) of the Act. The department contended that interest isn't equivalent to tax and thus not deductible. The Tribunal noted that interest on delayed payment is statutory under the Calcutta Municipal Act, distinct from tax levied under the Act. Referring to CIT v. Dalhousie Properties Ltd., the Tribunal held that interest isn't imposed like tax and is a compensation for late payment, not deductible under section 23(1).

Issue 3: Entertaining Appeal Related to Charging of Interest under Sections 139(8) and 215 of the Act:
The Commissioner (Appeals) didn't address the appeal on interest charged under sections 139(8) and 215, stating the appeal didn't lie on these issues. The assessee argued that the appeal should have been considered on merit, citing CIT v. Lalit Prasad Rohini Kumar. The department relied on Vidyapat Singhania v. CIT, supporting the Commissioner's decision. The Tribunal found the Commissioner erred in not entertaining the ground and referred the matter back to the Commissioner to give a finding after hearing the assessee.

In conclusion, the Tribunal partially allowed the appeal for statistical purposes, addressing the issues of depreciation on the tubewell, deduction for interest on delayed municipal tax payment, and the Commissioner's refusal to entertain the appeal related to interest charged under sections 139(8) and 215 of the Act.