1984 (2) TMI 138 - AT - Income Tax

Summary

Issues:
1. Interpretation of section 32(1)(iii) of the Income-tax Act, 1961 regarding the allowance of loss written off for incomplete railway siding.
2. Determining whether the incomplete railway siding qualifies as a plant or a building for the purpose of claiming relief under section 32(1)(iii).

Analysis:
1. The case involved an assessee, a private limited company deriving income from mining, that wrote off an amount for an incomplete railway siding during the assessment years 1972-73 and 1973-74. The Income Tax Officer (ITO) contended that section 32(1)(iii) only covers depreciable items like building, plant, machinery, and furniture, and since no depreciation was claimed on the expenditure, it could not be allowed under the said section. The Commissioner (Appeals) disagreed, stating that the incomplete railway siding did not fall under the categories of assets described in section 32(1)(iii), leading to the disallowance of the claim based on different reasoning.

2. The assessee argued that the incomplete railway siding, though not claimed for depreciation, should be considered a plant under rule 5 of the Income-tax Rules, 1962. The counsel for the assessee contended that even though incomplete, the nature of the asset remained unchanged and should be eligible for relief under section 32(1)(iii). Additionally, the counsel argued that the shed on the rest platform could be considered a building, further supporting the claim for relief. The departmental representative opposed the claim, emphasizing the conditions that must be fulfilled for relief under section 32(1)(iii) and questioning the nature of the asset as neither a plant nor a building.

3. The Tribunal analyzed the definition of 'plant' under section 43(3) of the Act, emphasizing its wide import and considering various court decisions on the matter. It was concluded that the incomplete railway siding, used for storage and stacking, qualified as an asset eligible for relief under section 32(1)(iii) either as a plant or a building. The Tribunal directed the ITO to allow relief to the assessee based on the nature of the asset and the demolition during the year under appeal.

In conclusion, the Tribunal partially allowed the appeal, determining that the incomplete railway siding could be considered either a plant or a building, making the assessee eligible for relief under section 32(1)(iii) based on the nature of the asset and the demolition during the relevant year.