2015 (8) TMI 613 - HC - Income Tax

Claim of depreciation on the cages to carry birds produced in the hatchery - CIT reopened the matter by issuing a notice under section 263 to hold that the cost of each cage is less than ₹ 5,000, they can be put to proper use only when they are attached to each other, thus disallowed the depreciation - Held that - Tribunal discussed the matter at length with reference to the relevant precedents. The principle governing the exercise of power in a revision was taken note of. The principle is to the effect that where two views of a particular aspect are possible, for an Income-tax Officer, and he has chosen one, the Commissioner cannot reopen the matter on the ground that another view is possible. The second ground where the power can be exercised is that the order passed by the Assessing Authority is patently illegal. The Tribunal found that none of the grounds exist in the instant case. Learned counsel for the Department is not able to demonstrate as to how the order passed by the Tribunal is erroneous. At any rate, the question as to whether a particular unit can be used independently or in tandem with similar units, is a pure question of fact and the same cannot be dealt with in an appeal under section 260A of the Act. - Decided in favour of assessee.

Summary

Issues:
Claim of 100% depreciation on cages under Income-tax Act, 1961 for assessment year 1992-93. Validity of disallowance of depreciation by Commissioner of Income-tax (Appeals) under section 263 of the Act. Tribunal's decision on the appeal and Department's challenge under section 260A of the Act.

Analysis:

1. The respondent, a hatchery, claimed 100% depreciation on cages purchased for the assessment year 1992-93 under the Income-tax Act, 1961. The assessing authority initially allowed the depreciation based on precedents. However, the Commissioner of Income-tax (Appeals) invoked powers under section 263 of the Act and disallowed the depreciation, stating that the cages could only be put to proper use when attached to each other due to common facilities. The respondent then appealed to the Income-tax Appellate Tribunal, which ruled in favor of the respondent, leading to the Department's appeal under section 260A of the Act.

2. The Commissioner relied on a judgment of the Karnataka High Court, emphasizing that if an item can only be used in tandem with similar units, the cumulative cost must be considered for depreciation. The Commissioner found that even though each cage's cost was less than Rs. 5,000, they were not used independently but as part of a larger compartment with shared facilities. The Tribunal, in its analysis, noted the principle that if two views are possible for an Income-tax Officer and one is chosen, the Commissioner cannot interfere unless the order is patently illegal. The Tribunal found no grounds for revision in this case and emphasized that the question of whether a unit can be used independently is a factual matter not suitable for appeal under section 260A of the Act.

3. Ultimately, the Tribunal dismissed the Department's appeal, stating that the order passed by the Tribunal was not erroneous. The decision highlighted that the issue of using a unit independently or in tandem with similar units is a factual determination and not within the scope of appeal under section 260A of the Act. The judgment concluded by dismissing the appeal without costs and disposing of the miscellaneous petition filed in the writ appeal.