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TMI Blog2003 (1) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... e court was delivered by R. K. ABICHANDANI J.-These two references raise common questions and have been argued together by learned counsel for both the sides. The Income-tax Appellate Tribunal, Ahmedabad Bench "B", has referred the following two questions, which are the subject matter of Income-tax Reference No. 51 of 1989, under section 256(2) of the Income-tax Act, 1961 : "(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in withdrawing rehabilitation allowance of Rs. 26,910 granted by the Commissioner of Income-tax (Appeals) under section 33B of the Income-tax Act, 1961, in respect of the properties which were extensively damaged ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in remanding the matter to the Income-tax Officer to work out relief under section 80J of the Income-tax Act, 1961 ?" The Tribunal has also referred the following two questions, which are the subject matter of Income-tax Reference No. 120 of 1989, under section 256(2) of the Income-tax Act, 1961 : "(1) Whether, on the facts and in the circumstances of the case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfill the conditions of section 33B and negatived the claim for rehabilitation allowance. The Commissioner of Income-tax (Appeals), however, held that the flood had affected the assessee as well as the other assessees who were carrying on business activities at Morbi in August, 1979. Since in the case of similar assessees the Income-tax Officer had allowed the claim on August 16, 1984, the Commissioner of Income-tax (Appeals) directed the Income-tax Officer to allow the assessee's claim under section 33B. However, as against the claim of Rs. 2,69,230 worked out by the assessee on the written down value of the assets of Rs, 4,83,022, the Commissioner of Income-tax (Appeals) reduced that figure of Rs. 2,89,812 and computed 60 per cent. rehabilitation allowance under section 33B thereof at Rs. 1,73,886. On the value of the assets which was written off being Rs. 62,300, 60 per cent. thereof, i.e., Rs. 37,380, was allowed as rehabilitation allowance. In the other case where the assessee claimed rehabilitation allowance in respect of damaged assets only the value of the assets was shown as Rs. 74,754 which was reduced to Rs. 44,850 on which deduction under section 33B was allowed at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance and not the entire written down value and such a reduction should answer the parameters laid down by section 32(1)(iii) of the Act. It was also argued that section 33B is a section granting relief for loss caused due to natural calamity and additional benefit is contemplated thereunder apart from the normal deductions available by way of terminal allowance under section 32(1)(iii) or revenue expenditure under section 37 of the Act. Learned counsel appearing for the Revenue have both supported the decisions of the Tribunal. Learned counsel appearing in Reference No. 120 of 1989 contended that section 32(1)(iii) was subject to section 34 of the Act and since the value of the damaged assets other than the destroyed assets were not written off under the proviso to clause (iii) of section 32(1), the claim in respect of the other assets was not allowable under section 32(1)(iii) and no deduction could be claimed under section 33B in respect thereof. He strongly contended that since section 32(1)(iii) did not refer to the assets which were damaged, it was not applicable for the purpose of working out any rehabilitation allowance under section 33B, because, section 32(1)(iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in the mining." "32. Depreciation.-(1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes o the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed- . . . (iii) in the case of any building, machinery, plant or furniture which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof : Provided that such deficiency is actually written off in the books of the assessee : Explanation.-For the purposes of this clause, - (1) 'moneys payable' in respect of any building, machinery, plant or furniture includes - (a) any insurance, salvage or compensation moneys payable in respect thereof ; (b) where the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessees on that count was for Rs. 4,83,022 and Rs. 74,754 as aforesaid, being the written down value of those assets. The Revenue has contended that since section 32(1)(iii) refers to building, machinery, plant or furniture being "sold, discarded, demolished or destroyed", and not to an extensive damage, no amount would be allowable by way of deduction thereunder where the asset is "damaged", but not "sold, discarded, demolished or destroyed". This contention, if accepted, would render the provision of section 33B nugatory in the context of "extensive damage" to the assets which is specifically made a ground for putting up the claim for rehabilitation allowance when it is caused directly as a result of flood due to which the business of the industrial undertaking was discontinued. Reference to section 32(1)(iii) is made in section 33B for the purpose of fixing the parameters for working out the rehabilitation allowance on the basis of the amount that would be allowable under section 32(1)(iii), both in respect of "extensive damage" and "destruction to the asset". Therefore, in case where the extensive damage to the asset is caused and it falls under section 33B, the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively damaged, we must, as a corollary, restore the order of the Commissioner of Income-tax (Appeals) in its entirety. From the order of the Commissioner of Income-tax (Appeals), it was submitted that the appellate authority had worked out the rehabilitation allowance not on the entire claim of the written down value of the damaged assets, but had reduced that valuation by 60 per cent. in both cases and had then worked out the rehabilitation allowance at 60 per cent. of that amount and, therefore, it should be assumed that he had taken the correct value for the purpose working out the allowance. This contention is misconceived, because, the Commissioner of Income-tax (Appeals) did not make any calculation with reference to the parameters laid down under section 32(1)(iii). He merely observed in para. 7 of his order that the estimate of written down value of the assessee was on the higher side and in his opinion, 60 per cent. of such written down value would be the reasonable amount. There was, in our opinion, no scope for forming such opinion without reference to the parameters laid down under section 32(1)(iii) which required the expression "moneys payable" to be considered in lig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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