High Court Of Madras
CIT vs. Soundararaja Finance Ltd.
Section 32(1)(ii), First proviso, 32(1)(ii), Third proviso
Asst. Year 1992-93
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) No. 88 of 2006
6th February, 2006
Counsel Appeared :
Mrs. Pushya Sitaraman, for the Appellant
JUDGMENT
P.P.S. Janarthana Raja, J. :
The present appeals are filed under s. 260A of the IT Act, 1961 by the Revenue, in ITA No. 1724/ Mad/1997, passed by the Tribunal, Madras, “B” Bench raising the following substantial question of law :
“Whether in the facts and circumstances of the case, the Tribunal was right in holding that the two electrical yarn cleaners by the assessee is entitled for depreciation at the rate of 100 per cent ?”
2. The facts leading to the above question of law are as under : (i) The assessee is a hire-purchase and lease finance company. The assessment year is 1992-93 and the corresponding accounting year ended on 31st March, 1992. The assessee-company filed its return of income on 31st Dec., 1992, declaring total income of Rs. 5,21,180. The return was processed under s. 143(1)(a) on 8th Dec., 1993. Later, the case was taken up for scrutiny on 6th Dec., 1993. During the year, the assessee-company purchased two electrical yarn cleaners in January, 1992 and February, 1992 and claimed 100 per cent, depreciation on those assets valued at Rs. 13,61,704. According to the AO, as these assets were acquired in 1992 and used for less than 180 days, the assessee is entitled for the depreciation of 50 per cent only. (ii) Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the case of the appellant and confirmed the order of the AO. Aggrieved by the same, the assessee filed an appeal to the Tribunal. The Tribunal allowed the appeal and given a direction to the AO to allow the full depreciation in the year under consideration.
3. We heard the arguments of learned standing counsel for the Revenue, who submitted that if the asset is used for less than 180 days, the third proviso to s. 32(1) would operate. Here the issue is related to the question that if the individual worth of the asset is less than Rs. 5,000, whether restriction as contemplated in the relevant proviso to s. 32 in regard to the 50 per cent, allowability would apply in the facts of the case. The relevant proviso to s. 32 reads as under : “Provided further that where an asset referred to in cl. (i) or cl. (ii) or cl. (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent, of the amount calculated at the percentage prescribed for an asset under cl. (i) or cl. (ii) or cl. (iia), as the case may be:” It is pertinent to refer to the Central Board of Direct Taxes Circular No. 591, dt. 30th Jan., 1991 reported in (1991) 188 ITR (St.) 1 at 6. The relevant portion is reproduced as under: “It is clarified that where the actual cost of any machinery or plant does not exceed five thousand rupees, the actual cost thereof shall be allowed as a deduction without any restriction, in respect of the previous year in which the machinery or plant is first put to use by the company for the purpose of its business or profession.”
It is to be noted that the first proviso to s. 32 was omitted by the Finance Act, 1995 w.e.f. 1st April, 1996. Prior to the omission, the first proviso as inserted by the Finance Act, 1966 w.e.f. 1st April, 1984, read as under: “Provided that where the actual cost of any machinery or plant does not exceed five thousand rupees, the actual cost thereof shall be allowed as a deduction in respect of the previous year in which such machinery or plant is first put to use by the assessee for the purposes of his business or profession.” Hundred per cent, depreciation on the actual cost of items of machinery or plant, the cost of which did not exceed Rs. 5,000 was available to the assessee by virtue of that proviso. The restriction put on the basis of user was not made applicable to the items of this category. This issue is clarified by the Central Board of Direct Circular referred to above. The Supreme Court in the case of UCO Bank vs. CIT (1999) 154 CTR (SC) 88 : (1999) 237 ITR 889 (SC), held that the circulars are binding on the Department and it is not open to the Department to raise a contention which is contrary to the circulars and instructions validly issued by the Board. The Revenue authorities were therefore not correct in restricting the depreciation to the extent of 50 per cent.
In view of the foregoing conclusions, we find no error in the order of the Tribunal and requires no interference. Hence no substantial question of law arises for consideration of this Court. Accordingly, the above tax case is dismissed. No costs.
[Citation : 283 ITR 559]
