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TMI Blog1979 (2) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ss determined by the Income-tax Officer in pursuance of the return filed after the expiry of the period prescribed in the general notice issued under s. 22(1) of the Indian Income-tax Act, 1922 ? (2) Whether, on the facts and in the circumstances of the case, the assessee was entitled to have depreciation on the cost of rollers as revenue deduction ? " The assessee is a co-operative society engaged in the business of manufacture of sugar and having its factory at Ichalkaranji. We are concerned in this reference with the assessment year 1960-61. Now, as far as question No. 1 is concerned, it appears to us to be unnecessary to set out the facts giving rise to this question inasmuch as both counsel are agreed that the answer to be given to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the AAC that this did not mean that no depreciation was allowable on the cost of rollers installed along with the machinery for the first time. The AAC found the argument quite convincing and reasonable. According to the AAC, although nil depreciation is mentioned against rollers in the Schedule, this would only be in the case of subsequent re- placement of the rollers when, instead of depreciation on its cost, the full cost of the roller on replacement is to be allowed as revenue expenditure. According to the AAC, therefore, since at the time when the machinery was first installed the rollers formed an integral part of the whole unit, they should not be treated separately but would be entitled to such depreciation as the entire machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le is quite specific and as far as sugar works are concerned, a rate of 9% is provided as the rate of depreciation on the written down value, but the item is mentioned as ' A '.'-(iv) Sugar works except rollers'. As far as rollers are concerned then we have another item, viz., Item 'A'.-' (xiii) which reads : Rollers used in flour mills and sugar works.' The rate provided is nil and a remark is to be found added which is to the effect that the cost of replacement of the rollers will be allowed as revenue expenditure. Under the Indian I.T. Act, 1922, deduction for normal depreciation is provided under s. 10(2)(vi) and it is made clear by the statutory provision that it will be at the percentage prescribed on the written down value. It is fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation would be allowed as and by way of deduction. It is only when the rollers outlive their useful life and when they are replaced, that the cost of replacement will be available to the assessee as a revenue deduction. There is thus considerable economic logic in the grievance of the assessee that there is no provision for reduction in the amount expended by the assessee towards the cost of the rollers installed for the first time along with the machinery of the sugar works. This has been rectified by the new rules. Law, and particularly income-tax law, is not necessarily in consonance with economics or logic. It appears to us that the AAC was swayed by the economic logic and held in favour of the assessee that the provision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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