(O&M) C I T vs. M/S RANA POLYCOT LTD.

ITA/163/2008HC Punjab & HaryanaPHHC01080128200828 August 2014Author: MR. JUSTICE DR. RAVI RANJAN,MR. JUSTICE SURINDER GUPTA6 pages
AI SummaryRemanded

What were the facts?

The revenue (Commissioner of Income Tax I, Chandigarh) appealed against an order of the Income Tax Appellate Tribunal (ITAT) for assessment year 2003-04. The assessee, M/s Rana Polycot Limited, a manufacturer and trader, had claimed depreciation at 25% on electrical installations. The Assessing Officer disallowed Rs.16,79,593/- of this claim, arguing these were electrical fittings eligible for only 15% depreciation. The CIT(A) allowed the assessee's appeal. The ITAT partly allowed the revenue's appeal, upholding the 25% depreciation for the assessee but deciding an issue regarding surcharge on MAT in favour of the department. The revenue's appeal to the High Court challenges the ITAT's decision on depreciation.

What did the High Court hold?

The High Court noted that Section 32 of the Act allows depreciation on tangible assets like plant and machinery. The definition of 'plant' under Section 43(3) is inclusive. The Apex Court in Scientific Engineering House Pvt. Limited vs. CIT laid down tests to determine if an apparatus is plant: does it fulfil the function of a plant in the trading activity, and is it a tool of trade? If electrical installations are utilized in the efficient functioning of plant and machinery, they are considered plant and machinery. However, if installed in the administrative portion of the office, they are not. Examining the assessee's affidavit, the Court found that some items (e.g., ceiling fans, desert coolers, water cooler) were used in the administrative/office wing and thus eligible for 15% depreciation. Other items used in the plant were eligible for 25%. Consequently, the Court remitted the matter to the Assessing Officer to recalculate depreciation on various items of electrical installations based on their usage and the legal principles enunciated. The judgment in Janta Sugar Industries was distinguished as not applicable to the present issue. The substantial questions of law were answered accordingly.

What were the issues?

1. Whether the ITAT was correct in allowing depreciation at 25% on electrical installations, when a separate head for electrical installations at 15% exists in the Income Tax Act, 1961? 2. Whether Power Control Panels, electric Power Cables, Electric Cable, and automatic Circuit Breakers should be considered plant and machinery (eligible for 25% depreciation) rather than electrical installations (eligible for 15% depreciation)? 3. Whether the ITAT was correct in allowing 25% depreciation on all items under electrical installations when the assessee itself bifurcated these heads and some items should attract 15% depreciation? Assessee's contention: The electrical installations are part of 'plant and machinery' eligible for 25% depreciation. They referred to an affidavit detailing items and their usage. Revenue's contention: The items claimed by the assessee fall under 'furniture and fittings' including electrical fittings, eligible for 15% depreciation as per Appendix I of the Income Tax Rules, 1962. They relied on the Allahabad High Court judgment in Janta Sugar Industries vs. Commissioner of Income Tax.

Which sections of the Income-tax Act were involved?

Section 32,Section 43(3),Section 115JB,Section 260A

AI-generated summary — verify with the full judgment below

ITA No.163 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.163 of 2008 (O&M) Date of decision: 28.8.2014 The Commissioner of Income Tax I, Chandigarh ……Appellant Vs. M/s Rana Polycot Limited …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Ms. Urvashi Dhugga,Advocate for the appellant. Mr. Ravi Shankar, Advocate for the respondent.

Ajay Kumar Mittal,J.

1.

This order shall dispose of ITA Nos.163, 167 of 2008 and 459 of 2009 as according to the learned counsel for the parties,the facts and the issue involved in all the three appeals are similar. However, the facts are being extracted from ITA No.163 of 2008. 2. ITA No.163 of 2008 has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 20.7.2007, Annexure A.3 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A' (in short, “the Tribunal”) in ITA No.26/Chandi/2007 for the assessment year 2003-04, claiming following substantial questions of law:- “1. Whether in the facts and circumstances of the case, the ITAT was right in holding the electrical insta

The order continues below.

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