1995 (7) TMI 115 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Rejection of assessee's claim for loss amounting to Rs. 8,66,670.
3. Refusal to allow carry forward of loss of earlier years.
4. Refusal of investment allowance.
5. Depreciation claim.
6. Additional depreciation on new machinery.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was filed late by one day. An application for condonation was submitted, and the delay was condoned as it was nominal and the reason provided was adequate.

2. Rejection of Assessee's Claim for Loss Amounting to Rs. 8,66,670:
The assessee, engaged in the manufacture of gas cylinders, filed a return showing a loss of Rs. 8,66,670 for the previous year ending on 30-6-1984. The Assessing Officer (AO) rejected this claim on the grounds that the assessee had changed the accounting period from December 31 to June 30 without obtaining the necessary permission under section 3(4) of the Income-tax Act. The assessee argued that the production commenced on December 1, 1983, and thus had the right to exercise the option for the previous year. The Tribunal examined the provisions of section 3(1)(e) and concluded that the assessee had the right to adopt a different accounting period since the business commenced on December 1, 1983. The Tribunal cited the Supreme Court's decision in CIT v. Ramaraju Surgical Cotton Mills Ltd. and other relevant cases to support its decision. Consequently, the Tribunal accepted the assessee's plea and allowed the claim for the loss up to 30-6-1984.

3. Refusal to Allow Carry Forward of Loss of Earlier Years:
Ground No. 4, relating to the refusal to allow the carry forward of loss of earlier years, was not pressed by the assessee's counsel and was thus rejected.

4. Refusal of Investment Allowance:
The Tribunal held that if the assessee's plea regarding the 'previous year' was accepted, the investment allowance could be allowable as a consequential relief. The Tribunal directed that the investment allowance be allowed in accordance with the law.

5. Depreciation Claim:
The assessee's counsel contended that the AO allowed depreciation at Rs. 3,62,137, whereas the assessee claimed Rs. 16,48,226 as per the Income-tax Rules. The Tribunal agreed with the assessee's plea and directed the AO to compute depreciation in accordance with the law.

6. Additional Depreciation on New Machinery:
The AO denied additional depreciation on new machinery installed up to 31-3-1985, stating the accounting period ended on 31-12-1984. The assessee clarified that the claim was only for machinery installed up to 30-6-1984. The Tribunal restored this issue to the AO to work out additional depreciation on new machinery in accordance with the law.

Conclusion:
The appeal was partly allowed. The Tribunal condoned the delay in filing the appeal, accepted the assessee's claim for loss up to 30-6-1984, directed the AO to allow investment allowance and compute depreciation as per the law, and restored the issue of additional depreciation to the AO for fresh consideration. The refusal to allow the carry forward of loss of earlier years was not pressed and thus rejected.