1979 (11) TMI 173 - AT - Income Tax

Summary

Issues:
1. Correctness of depreciation claimed by the assessee at 20% on cinema assets.
2. Whether the building of the cinema hall should be treated as a plant for depreciation purposes.
3. Validity of the order passed by the ITO under section 154 of the Act.

Detailed Analysis:
1. The appeal pertains to the correctness of the depreciation claimed by the assessee at 20% on the assets of a cinema, treating them as plant. The ITO initially allowed the depreciation at 20% on various assets, but later concluded that the depreciation claimed was incorrect. The ITO then issued a show cause notice to the assessee under section 154 of the Act to rectify the depreciation calculation. The assessee relied on previous judgments to support the claimed depreciation. The ITO recalculated the depreciation on different assets, leading to a revised allowable depreciation amount.

2. The assessee contended that the building of the cinema hall should be treated as a plant due to its features like wood paneling, plaster of paris, false ceiling, thermocooler, and soundproof devices aimed at enhancing customer experience and profitability. The assessee argued that since the building qualified as a plant, the depreciation claimed at 20% was appropriate. However, both the ITO and the AAC did not accept this argument and upheld the ITO's order under section 154. The counsel for the assessee cited previous cases to support the depreciation claim but was unsuccessful in convincing the authorities.

3. The Tribunal considered whether the mistake in allowing depreciation at different rates on various assets was obvious and patent, as required for rectification under section 154. Referring to Supreme Court decisions, the Tribunal found that the mistake was not glaring, and two opinions could be held on the matter. As per legal precedent, a mistake that allows for multiple interpretations cannot be rectified under section 154. Consequently, the Tribunal set aside the ITO's order, holding that the depreciation issue did not warrant rectification under the Act. The appeal was allowed in favor of the assessee.