High Court Of Madras
CIT vs. Alagendran Finance Ltd.
Sections 32(1)(ii), proviso
Asst. Year 1991-92, 1992-93
V.S. Sirpurkar & C. Nagappan, JJ.
Tax Case Appeal Nos. 120 & 121 of 2000
9th April, 2003
Counsel Appeared
T. Ravikumar, for the Appellant : V. Ramachandran, for the Respondent
JUDGMENT
C. Nagappan, J. :
Both the appeals are filed under s. 260A of the IT Act, 1961, and they are directed against the common order of the Tribunal, Madras, in ITA Nos. 370 and 560/MDS of 1996, for the asst. yrs. 1991-92 and 1992-93, dt. 28th Jan., 1999.
2. The appeals have been admitted to consider the following question of law : “Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee is entitled to 100 per cent, depreciation of centering sheets as per the proviso to s. 32(1)(ii) of the Act on the ground that they are individual plant/machinery ?”
The respondent-assessee is a company, which is carrying on the business of leasing out its assets. It has purchased centering sheets during the asst. yrs. 1991-92 and 1992-93 and claimed the cost of the centering sheets as deduction by way of 100 per cent depreciation under the first proviso to s. 32(1)(ii) of the IT Act on the ground that each centering sheet constitutes an individual plant/machinery costing far less than Rs. 5,000. The AO held that each centering sheet is not an independent plant or machinery, since they are used in conjunction with the props to make a platform on which the reinforced concrete is laid and left to settle and dry and they cannot be used independently and the assessee is not entitled to 100 per cent, depreciation as claimed. On appeal by the assessee, the CIT(A), Coimbatore, confirmed the order of the AO. On further appeal, the Tribunal held that each centering sheet would constitute a plant and the assessee is entitled to depreciation as claimed and allowed the appeals. Aggrieved by the same, the Revenue has preferred the present appeals.
The only question is as to whether individual centering sheets can be regarded as plant for the purpose of the first proviso to s. 32(1)(ii) of the Act.
Learned counsel for the appellant/Revenue contended that the centering sheets are not used as independent units, but they are used collectively to make a platform on which reinforced concrete is laid and left to settle and dry and they are parts of a bigger unit used in building construction activity and therefore the assessee is not entitled to 100 per cent depreciation and he relied on the decision of the Karnataka High Court in Pathange Poultry Farm vs. CIT (1995) 123 CTR (Kar) 598 : (1994) 210 ITR 668 (Kar). The question before the Court in that case was as to whether the assessee was entitled to 100 per cent, depreciation under s. 32 of the IT Act on the cost of the cages purchased, on the ground that each cage was a separate plant valued at less than Rs. 750, when the cages were not separate but one continuous fabricated unit in which partitions were made for a number of birds to be housed in each compartment and the High Court held that cages were not used as independent units but were utilised by the assessee for fabrication of bigger compartments to have a larger number of birds with common facilities of lighting, feeding, watering, etc., and they became a part of the bigger plant and they cannot be termed as plant to individually qualify for the depreciation allowance as claimed by the assessee. In the present case, centering sheets are separate sheets and hence the above decision does not apply.
Learned counsel for the Revenue cited a decision of the Madhya Pradesh High Court in CIT vs. Singhania Enterprises (1998) 149 CTR (MP) 76 : (1998) 234 ITR 822 (MP), wherein, the assessee had claimed depreciation at 100 per cent, under s. 32 of the IT Act on centering material and the Revenue contended that each centering material could not be taken individually, but all the centering material put together, including the scaffolding, constituted one plant and machinery and the High Court held that sufficient material was not before the Court in order to examine the question whether one or two plates of centering material would constitute a plant as a whole or not and it remanded the case to the Tribunal to determine that question. A Division Bench decision of this Court in First Leasing Co. of India Ltd. vs. CIT (2000) 164 CTR (Mad) 179 : (2000) 244 ITR 238 (Mad) was brought to our notice, in which question arose as to whether individual bottles can be regarded as plant for the purpose of the first proviso to s. 32(1) (ii) of the Act and this Court held that each bottle can be regarded as a plant and the assessee is entitled to claim 100 per cent. depreciation in respect of it, since its cost is less than Rs. 750. R. Jayasimha Babu, J., speaking for the Bench, observed as follows : “We do not see any foundation for such a view within the four corners of the proviso to s. 32(1)(ii) of the Act. The benefit of the proviso is not confined only to units in bulk where the cost of each unit is less than Rs. 750. The proviso would be rendered futile if all similar units of plant, the individual value of which is Rs. 750 are to be grouped together and taken as one single unit for the purpose of calculating depreciation. The proviso does not refer to the number of units but refers to the value of the individual unit and once it is found that the value of the individual unit which could be regarded as a plant, is below Rs. 750 it would qualify for 100 per cent, depreciation as provided in the proviso.
The task of determining the circumstances in which the proviso is applicable is thus quite simple. One has to first identify the plant or machinery. If the asset claimed by the assessee as plant and machinery is found to be such, the only question to be answered thereafter is as to the value thereof. If the value is below Rs. 750 the proviso will apply. There is no need or occasion for raising a further question as to how many numbers of such units were bought by the assessee at a time or in the course of the year or how many such units are normally used by the assessee for his business, or how many such units are normally regarded as the tradable bulk by the manufacturers of such units. The functional test to the extent relevant is only for the purpose of ascertaining the usability of that unit as a plant or machinery by itself without being dependent on other similar units for making it functional.”
8. As observed, the benefit of the proviso to s. 32(1)(ii) of the Act is not confined only to units in bulk and it does not refer to the number of units, but refers to the value of individual units and if the individual unit is regarded as a plant and if it is valued below Rs. 5,000, it would qualify for 100 per cent, depreciation. There is no question of how many units are normally used for the business and the test is as to whether one centering sheet can be identified as a plant or machinery. While erecting scaffoldings for a building, centering sheets are usually arranged in different shapes and sizes and a single sheet also is used for a particular work. It is not, as a matter of rule, centering sheets have to be used collectively for all works. Depending upon the nature of work, the number of centering sheets to be used varies. A single individual centering sheet may be sufficient for a particular work in the process of construction of a building and hence it would constitute a plant and if the value of it is less than Rs. 5,000, the assessee is entitled to claim 100 per cent, depreciation as per the proviso to s. 32(1)(ii) of the Act.
9. Learned senior counsel for the respondent/assessee contended that the finding of the Tribunal is on a question of fact and no substantial question of law is involved for adjudication and relied on the decision of the Andhra Pradesh High Court in CIT vs. Sree Rama Agricultural Poultry Farm (2002) 258 ITR 336 (AP). It is true that the finding recorded by the Tribunal that each centering sheet is a plant is essentially on a question of fact and the Tribunal is the final fact-finding authority. However we have elucidated the issue on the merits in view of the importance of the question involved.
The appeals are accordingly dismissed. No costs.
[Citation : 264 ITR 269]
