1980 (7) TMI 132 - AT - Income Tax

Summary

Issues:
1. Depreciation rate for shuttering plates used in construction.
2. Addition of income on sale of empty bags.
3. Allowance of expenditure on pipes and tirpals.
4. Depreciation on cars used by the assessee.

Detailed Analysis:

Issue 1: The primary contention in the appeal was regarding the depreciation rate allowed for shuttering plates used in construction. The assessee, a building contractor firm, claimed depreciation at a rate of 30%, citing similarity to "Concrete pipes manufacture moulds." However, the ITO allowed only 10% depreciation, considering the general rate for machinery and plant. The CIT (A) upheld the decision, stating no specific rate for shuttering plates was mentioned in the depreciation schedule. The assessee argued that the plates could be categorized under "Patterns, dies and templates," entitling them to 30% depreciation. After considering both parties' arguments and the nature of assets, the tribunal ruled in favor of the assessee, allowing 30% depreciation under the relevant category.

Issue 2: Another issue raised was the addition of income on the sale of empty bags. The Revenue authorities added Rs. 10,893 as additional income from the sale of bags, despite determining the assessee's income based on a flat rate of contract receipts. The tribunal disagreed with this addition, reasoning that when a flat rate of profit was applied to contract business income, separate additions for probable income from bag sales were unjustified. Consequently, the tribunal removed the addition of Rs. 10,893 from the assessment.

Issue 3: The third contention involved the allowance of Rs. 7,656 spent on pipes and tirpals. The assessee sought this amount as an expense, but the tribunal rejected the claim. Since the net income from the contract was estimated based on a flat rate of profit, separate allowances for specific expenses were deemed unwarranted. Therefore, the tribunal dismissed the claim for the expenditure on pipes and tirpals.

Issue 4: The final issue pertained to the depreciation on cars used by the assessee, where 50% of the depreciation was disallowed due to personal use by partners. The tribunal found that the cars were predominantly used for business purposes, with minimal personal use. Considering the circumstances, the tribunal directed to only disallow 1/3rd of the depreciation on cars related to personal use by partners, instructing the ITO to adjust the assessment accordingly. As a result, the appeal was partly allowed in this regard.