1983 (10) TMI 116 - AT - Income Tax

Summary

Issues:
1. Clubbing of income of old firm with the assessee firm under section 187(2).
2. Allowance of depreciation on machinery at a higher rate.

Clubbing of income:
The appeal involved the clubbing of income of the old firm with the assessee firm under section 187(2) for the assessment year 1979-80. The old firm, M/s Navrattanmal Prakashchand, reconstituted itself as M/s Board Dyeing Co. after a partner's retirement. The issue was whether this constituted a change in the firm's constitution or a dissolution. The CIT (A) upheld the clubbing of income, considering it a change in constitution. The assessee argued for two separate assessments based on a new partnership deed. The Tribunal noted conflicting High Court decisions but followed the Allahabad High Court's view, directing two separate assessments for the two periods on the reconstituted firm.

Depreciation on machinery:
The second ground of appeal concerned the non-allowance of depreciation on machinery at a higher rate. The assessee claimed 15% depreciation due to the use of corrosive chemicals on printing tables. The CIT (A) rejected this, stating the chemicals did not damage the tables, and wax acted as a barrier. The Tribunal agreed, finding no evidence of damage to the tables and uncertainty on whether they qualified as machinery. As the chemicals did not directly contact the tables, the higher depreciation rate was disallowed. The Tribunal upheld the CIT (A) decision on this issue, denying the higher depreciation rate.

In conclusion, the Tribunal partly allowed the appeal, directing two separate assessments for the reconstituted firm's income and denying the higher depreciation rate on machinery due to lack of damage caused by the chemicals.