In Commissioner Of Income Tax v. Goodlas Nerolack Paints Limited[[1

HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No.255 of 2003 JUDGMENT:-(Per Hon’ble Sri Justice L.Narasimha Reddy) This appeal is filed against the order, dated 14.02.2003, passed by theHyderabad Bench ‘B’ of the Income Tax Appellate Tribunal inI.T.A.No.920/Hyd/1998, raising the following question of law:- “Whether the Appellate Tribunal is justified in holding that theasset falling within the purview of 1[st] proviso to Section 32(1) ofthe I.T. Act is not subject to the restrictions covered by the 2[nd]proviso to the said section and the assessee is entitled to 100%depreciation on such asset in spite of its user for business wasless than 180 days during the relevant assessment year?” Heard Sri S.R.Ashok, learned Senior Standing Counsel for theappellant and Sri P.Murali Krishna, learned counsel for the respondent. The relevant assessment year is 1995-96 corresponding to financialyear 1994-95. The only controversy is about the depreciation on the assetsacquired by the respondent during the relevant period. The Assessing Officerallowed the depreciation to the extent of 50% only by applying third provisoto Section 32(1)(ii) of the Act. The Commissioner (Appeals) confirmed thesame and on further appeal, the Income Tax Appellate Tribunal, allowed100% depreciation, through common order in I.T.A.Nos.1966 and1967/Hyd/1996 following the judgment in Gasolec Appliances (P) Ltd., v.DCIT (Assts). As against the orders of the Tribunal, referable to I.T.ANo.1967/Hyd/96, Department preferred appeals in I.T.T.A.Nos.8 and 44 of2002 and this Court through a common judgment dated 23.07.2014 held thatif the article or item which formed block of assets has been put to use for aperiod of less than 180 days, the deduction shall be restricted to 50% of thecost thereof. While dealing with the above appeals through a detailed order dated 23.07.2014, we held that the cylinders purchased by the assesseequalify for 100% depreciation irrespective of the extent of use. We furtherclarified that the requirement as to the extent of use becomes relevant onlyfor the items covered by the third proviso to Section 32 of the Income Tax Act(for short ‘the Act’). In the instant case, the items involved are gas cylinders,whose cost is less than 5,000/-. They are covered by the first proviso toSection 32 of the Act and the requirement as to the extent of use is totallyirrelevant for such items. We also noticed that this issue was clarified by the Central Board ofDirect Taxes vide Circular No.591 dated 30.01.1991 and it was taken note of in Commissioner of Income Tax v. Goodlas Nerolack Paints Limited[[1]]. The relevant portion is reproduced as under: “It is clarified that where the actual cost of any machinery or plantdoes not exceed five thousand rupees, the actual cost thereofshall be allowed as a deduction without any restriction, in respectof the previous year in which the machinery or plant is first put touse by the company for the purpose of its business orprofession.” This aspect was also noticed by the Madras High Court inCommissioner of Income-tax vs. Soundararaja Finance Ltd.,[[2]]and thesame view was taken. Therefore, we dismiss the appeal answering the question referredabove, in favour of the assessee and against the revenue. There shall be noorder as to costs. Miscellaneous petitions, if any, filed in this appeal shall also standdisposed of. ____________________________ L. NARASIMHA REDDY, J ____________________________CHALLA KODANDA RAM, J Gk/Kdl [1](1991) 188 ITR (St.)1 at 6(1991) 188 ITR (St.)1 at 6 [2](2006) 283 ITR 559 (Mad)(2006) 283 ITR 559 (Mad)