1995 (6) TMI 86 - AT - Income Tax

Summary

Issues:
Claim of investment allowance and depreciation on computer under sections 32AB and 32 of the Income-tax Act, 1961.

Analysis:
The appeal involved the assessee's claim for investment allowance and depreciation on a computer under sections 32AB and 32 of the Income-tax Act, 1961. The assessee initially claimed investment allowance of Rs. 42,555 for a computer installed during the relevant year. The computer was operated by a third party, and after the party left without paying rent, the computer was taken by the assessee as security against unpaid bills. The Assessing Officer disallowed the claim, stating that the assessee did not purchase the computer. The CIT(A) upheld this decision, emphasizing that the assessee did not have ownership rights over the computer as it was retained as security against personal bills. The CIT(A) also rejected a claim for bad debts as the amount was not written off. The assessee appealed this decision before the Tribunal, focusing on the ownership aspect.

The Tribunal considered the arguments presented by both the assessee's Authorized Representative and the Departmental Representative. The Authorized Representative relied on a Supreme Court decision in CIT v. T.N. Aravinda Reddy, asserting that the CIT(A)'s decision should be set aside. On the other hand, the Departmental Representative supported the revenue authorities' decision, contending that the assessee did not purchase the computer, thus disqualifying them from claiming investment allowance and depreciation.

In its analysis, the Tribunal referred to the Supreme Court decision in CIT v. T.N. Aravinda Reddy, where ownership rights were discussed concerning property transfer within a Hindu Undivided Family. The Tribunal concluded that the actions of the third party implied relinquishment of the computer to the assessee, allowing for the presumption of purchase through adjustment against a debt. Citing the common meaning of "purchase" as acquiring for a price or equivalent, including adjustment towards a debt, the Tribunal found that the assessee effectively purchased the computer. Relying on this interpretation and the precedent set by the Supreme Court, the Tribunal agreed with the Authorized Representative's arguments and allowed the appeal in favor of the assessee.

In conclusion, the Tribunal allowed the appeal, granting the assessee the claim for investment allowance and depreciation on the computer. The decision was based on the interpretation of the term "purchase" and the circumstances surrounding the acquisition of the computer, aligning with the principles established in the Supreme Court judgment referenced during the proceedings.