1990 (4) TMI 92 - AT - Income Tax

Summary

Issues:
1. Disallowance of initial depreciation u/s. 32(1)(iv) on canteen for low-paid employees.

The judgment by Appellate Tribunal ITAT Chandigarh involved the challenge of an order dated 1-10-1987 by the ld CIT(A) for the assessment year 1981-82. The first issue raised was regarding the disallowance of initial depreciation u/s. 32(1)(iv) of the Income-tax Act on a canteen for low-paid employees. The assessee, a private limited company, claimed initial depreciation on the canteen but it was disallowed by the ld IAC(A) on the grounds that the canteen was essential for the lessee's employees, not the assessee's. The ld CIT(A) upheld the disallowance, leading to the appeal. The Tribunal noted that the canteen was set up in the leased premises by the assessee in agreement with the employees. The Revenue argued that since the assessee was not conducting business directly, initial depreciation was not allowable. However, the Tribunal found that the canteen was indeed used by the workers in connection with the assessee's business and allowed the initial depreciation claim.

The Tribunal analyzed Section 32 of the Income-tax Act, which deals with depreciation, specifically clause (iv) of sub-section (1). The premises in question were constructed after 31-3-1961 and used as a canteen for low-paid employees during the relevant period. The Tribunal concluded that the assessee met all conditions for claiming initial depreciation and that the disallowance by the ld IAC(A) was unjustified. It was established that the canteen was being used by the workers in connection with the assessee's business, supporting the allowance of initial depreciation. Therefore, the Tribunal vacated the finding under challenge and allowed the assessee's claim for initial depreciation.

The judgment also touched upon minor issues in paragraphs 7 to 9, which are not detailed here. The overall decision favored the assessee, allowing the initial depreciation claim on the canteen for low-paid employees.