1997 (12) TMI 150 - AT - Income Tax

Summary

Issues:
Appeal against disallowance of depreciation on gas cylinders.

Analysis:
The appeal involved the disallowance of depreciation amounting to Rs. 7,66,046 on gas cylinders purchased by the assessee company. The Assessing Officer restricted the depreciation to 50% as the cylinders were used for less than 180 days during the relevant accounting year. The CIT(Appeals) upheld the disallowance, leading to the appeal by the assessee.

During the hearing, the counsel for the assessee argued that the entire cost of purchase should be allowed as depreciation as each cylinder's cost was below Rs. 5,000. He relied on the proviso to section 32(1)(ii) to support his contention. On the other hand, the Departmental Representative argued that the third proviso to section 32(1)(ii) restricted depreciation to 50% if the asset was used for less than 180 days. He also questioned the necessity of purchasing new cylinders based on production data.

The Tribunal analyzed the relevant provisions of section 32(1)(ii) and the provisos. It was noted that the third proviso applied to assets forming part of a block of assets, whereas the first proviso allowed the actual cost of machinery below Rs. 5,000 as a deduction. Referring to expert commentary, the Tribunal concluded that for assets with a cost below Rs. 5,000, the depreciation was not to be reduced, and the entire actual cost should be allowed as depreciation.

The Tribunal rejected the argument regarding the necessity of new cylinder acquisition, as the Assessing Officer had accepted the purchase and usage details provided by the assessee. Since the Assessing Officer acknowledged the usage of cylinders for business purposes, the Tribunal allowed 100% depreciation on the gas cylinders purchased and used during the relevant year, overturning the disallowance.

In conclusion, the Tribunal allowed the appeal by the assessee regarding the disallowance of depreciation on gas cylinders, emphasizing the application of relevant provisions and the acceptance of factual usage by the Assessing Officer.