1979 (6) TMI 87 - AT - Income Tax

Summary

Issues:
1. Depreciation rate for canteen buildings.
2. Depreciation on buildings and machinery used for scientific research.
3. Disallowance of payment made towards sports club.

Detailed Analysis:

1. The first issue pertains to the depreciation rate for canteen buildings. The contention was whether depreciation at 10% should be allowed instead of the 5% allowed by the Income Tax Officer (ITO). The Appellate Tribunal referred to a previous order by the Tribunal, Madras Bench 'C', which accepted depreciation at 10% for canteen buildings. The Tribunal reasoned that the canteen buildings, due to frequent assembly of workers and operational processes, qualify for higher depreciation. The Tribunal upheld the order of the Appellate Authority Commissioner (AAC) based on the previous decision and the nature of activities in the canteen buildings.

2. The second issue involved the allowance of depreciation on buildings and machinery used for scientific research. The Revenue contended that no depreciation should be allowed as the assets' cost was fully deducted under section 35 in previous years and did not meet the conditions under section 35(1)(v)(i). The Tribunal referred to a previous case where it was held that assets used solely for scientific research, not related to the business, do not qualify for depreciation. The Tribunal agreed with the Revenue that no depreciation is admissible for assets used for scientific research post-March 31, 1967, as per the provisions of section 35(2)(i)(a).

3. The final issue concerned the disallowance of a payment made to a sports club, claimed as an advertisement expense. The AAC allowed the deduction, considering it as an advertisement expense for the promotion of the assessee's business. The Revenue challenged this decision, arguing that it was a donation, not an advertisement expense. The Tribunal, referring to a previous case, held that the expenditure for the sports club was indeed for advertising the assessee's products, thereby promoting its business. The Tribunal upheld the AAC's decision in favor of the assessee, allowing the deduction for the payment made to the sports club.

In conclusion, the Appellate Tribunal partially allowed the appeal, upholding the depreciation rate for canteen buildings and disallowing depreciation on assets used for scientific research while allowing the deduction for the payment made to the sports club as an advertisement expense.