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2015 Supreme(AP) 256
In the High Court of Judicature at Hyderabad
DILIP B.BHOSALE, M.S. RAMACHANDRA RAO, A. RAMALINGESWARA RAO, JJ.
Commissioner of Income-Tax, Visakhapatnam – Appellant
Versus
S. Vijaya Kumar – Respondent
I.T.T.A. No.95 of 2001
Decided on : 05-06-2015
For the Appellant: S. Vivek Chandra Shekar
For the Respondent: Challa Gunaranjan
Headnote:
Taxation – Income Tax Act, 1960 – Section 32(1)(ii) – Income Tax Act, 1961 – Section 260A – Assessment – Depreciation – Shuttering material – Whether on facts and in the circumstances of the case, the appellate Tribunal was justified in law in holding that assessee was entitled to claim 100% depreciation on the centering/shuttering material – Respondent-assessee had claimed deduction of amount being depreciation on machinery, centering and shuttering equipments at for the Assessment – According to the assessee, assets include machinery below Rs.5,000/- each of the value of Rs.3,88,562/- and centering and shuttering equipments of the value of Rs.13,19,434/ - Assessing Officer allowed depreciation to extent of 33 1/3 % on centering and shuttering materials – Assessee, feeling aggrieved and dissatisfied with the order of the Assessing Officer preferred an appeal before the Commissioner of Income Tax (Appeals) – Commissioner (Appeals) allowed appeal and directed the Assessing Officer to allow 100% depreciation – As Against this order, Revenue went in appeal before the Income Tax Appellate Tribunal. The Tribunal, relying on its earlier order in ITA culminating in the first judgment, upheld the order of Commissioner (Appeals). It is against this backdrop, Revenue preferred the instant appeal under Section 260A of the Income Tax Act, 1961 (for short “the Act”). We make it clear that we have not stated the facts in detail, since, after expressing our opinion, we propose to send the appeals to the Court which is assigned to hear these appeals on merits and in the light of the opinion expressed by this Bench – Held, It is significant that the Income Tax Officer allowed normal depreciation on these very articles under Clause of Section 10 of the Act. He must have allowed depreciation on the footing that these articles constitute machinery or plant within the meaning of Clause of Section 10 of the Act – If the poles, cables, conductors and switchboards constituted "machinery or plant" within the meaning of Clause (vi), there is no reason why they should not constitute "machinery or plant" within the meaning of Clause of Section 10 of the Act. Even if there is some difficulty in looking upon poles, cables, conductors and switch-boards as machinery, there is no difficulty in accepting case that these articles constitute a plant within the meaning of Clause of Section 10(2) of the Act. The Tribunal was, therefore, right in holding that is entitled to development rebate under Clause of Section 10 of the Act. We answered the question referred to this court – As explained in by the Gujarat High Court (which was followed in Express Newspapers (32 supra), this principle would not apply if it is an integral part of another asset as such. Once an apparatus becomes an integral part of another asset as such, it loses its identity as an asset and the asset of which it becomes an integral part is only to be considered as an asset. For example, when owns a motor car for the purposes of his business, necessarily it includes all the parts which go into the making of the car and necessary for it’s running. Notwithstanding the fact that individually taken some of the parts by themselves may be treated as machine or plant if used independently, once it is fitted in another, it loses its identity as a machine independent of the machine in which it is fitted – Application stand disposed.
1. In view of divergence of opinions in two judgments of the Division Benches of this Court, the then learned Chief Justice made reference to this Full Bench to express opinion on the question “Whether on the facts and in the circumstances of the case, the appellate Tribunal was justified in law in holding that the assessee was entitled to claim 100% depreciation on the centering/shuttering material?”
2. The first Division Bench in Commissioner of Income Tax Vs. Raghavendra Constructions [(2011) 332 ITR 235 (AP)] (for short “the first judgment”) decided on 19.01.2011, while dealing with the aforesaid question, held that if a thing (material) itself is durable but cannot effectively stand alone without functional integration, it would not qualify as a plant and answered the question against the assessee and in favour of the Revenue. The second Division Bench in Commissioner of Income Tax Vs. Live Well Home Finance (P) Limited decided on 27-11-2014 (for short “the second judgment”), however, answered the question in favour of the assessee and against the Revenue, applying durability and functional test to hold that every individual thing (material), such as shuttering plate used for formation is a plant.
3. Having noticed the divergent views/opinions expressed by two Division Benches, another Division Bench while dealing with the instant appeal (ITTA No.95 of 2001), as prayed for by learned counsel for the parties, framed the question, as reproduced in the first paragraph, vide order dated 14-02-2015 directed the Registry to place the order along with the proceedings before the Hon’ble the Chief Justice for appropriate orders. Accordingly, the above question has been referred to this Full Bench.
4. The facts that are necessary, to deal with the question, are that the respondent-assessee in ITTA No.95 of 2001 had claimed deduction of Rs.17,93,556/- being depreciation on machinery, centering and shuttering equipments at the rate of 100% for the Assessment Year 1991-92. According to the assessee, the assets include machinery below Rs.5,000/- each of the value of Rs.3,88,562/- and centering and shuttering equipments of the value of Rs.13,19,434/-. In the instant case, we are concerned only with centering and shuttering materials. The Assessing Officer allowed depreciation to the extent of 33 1/3 % on the centering and shuttering materials. The assessee, feeling aggrieved and dissatisfied with the order of the Assessing Officer preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner (Appeals) allowed the appeal and directed the Assessing Officer to allow 100% depreciation as provided for in the proviso to Section 32(1)(ii) of Income Tax Act, 1960 (for short ‘the Act’). Against this order, the Revenue went in appeal before the Income Tax Appellate Tribunal. The Tribunal, relying on its earlier order in ITA No.435/Hyd/1997 dated 13.11.1998 culminating in the first judgment, upheld the order of Commissioner (Appeals). It is against this backdrop, the Revenue preferred the instant appeal under Section 260A of the Income Tax Act, 1961 (for short “the Act”). We make it clear that we have not stated the facts in detail, since, after expressing our opinion, we propose to send the appeals to the Court which is assigned to hear these appeals on merits and in the light of the opinion expressed by this Bench.
5. The arguments advanced by learned counsel for the parties were centered around Sections 32 and 43 of the Act. The relevant portion of Section 32 (1) (ii), as it stood at the relevant time, reads thus:-
“Section 32. DEPRECIATION :
(1) In respect of depreciation of buildings , machinery , plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed—
(i) ……….
(ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed:
Provided that where
