DEEPAK TALKIES vs. COMMISSIONER OF INCOME TAX

ITR/406/1983HC GujaratGJHC24011872198309 January 1997Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE R.BALIA5 pages
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What were the facts?

The assessee, Deepak Talkies, claimed depreciation at 15% on various items related to its theatre building, including plaster of paris, main gate, and sanitary fittings, treating them as plant. The Income Tax Officer (ITO), under Section 154, sought to reduce this depreciation to 5%, arguing these items were integral parts of the building and thus subject to the lower rate applicable to buildings. The Appellate Assistant Commissioner (AAC) partly accepted the assessee's plea regarding fibre glass. The Income Tax Appellate Tribunal (ITAT) upheld the ITO's order. The case was referred to the High Court of Gujarat at Ahmedabad at the instance of the assessee for assessment year 1977-78.

What did the High Court hold?

The High Court held that the assessee's contention merits acceptance. The issue of whether a theatre building itself can be treated as a plant, and whether its fixtures and fittings can be considered plant, has received differing interpretations from various High Courts. This indicates that the matter is debatable. Citing the Supreme Court decision in T.S. Balaram, ITO v. Volkart Brothers, the Court stated that a mistake apparent on the record must be obvious and patent, not requiring a long process of reasoning or involving points where two opinions can conceivably exist. A debatable point of law is not a mistake apparent from the record. Therefore, the ITO was not justified in exercising jurisdiction under Section 154, and the Tribunal was not justified in affirming that order. The questions are answered in favour of the assessee and against the revenue. The reference is disposed of.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the order of the Income Tax Officer passed under Section 154 of the Act reducing depreciation from 15% to 5% on various items connected with the theatre building, such as plaster of paris, main gate, sanitary etc.? (Question of law, turns on Section 154 and Section 32 of the Income Tax Act, 1961). 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the order passed by the ITO was within the jurisdiction conferred upon him by virtue of Section 154 of the Act, and whether the Tribunal was further justified in holding that the ITO was justified in reducing depreciation from 15% to 5% on fibre glass costing Rs.19,387/- even though the Appellate Assistant Commissioner had deleted the said item from the order passed under Section 154 of the Act? (Question of mixed law and fact, turns on Section 154 and Section 32 of the Income Tax Act, 1961). Assessee's contention: The mistakes identified by the ITO for invoking Section 154 were not mistakes apparent on record. The Tribunal erred in sustaining the Section 154 order. Revenue's contention: The theatre is run in a building, and items like plaster of paris, main gate, and sanitary fittings are integral parts of the building. Therefore, the depreciation rates applicable to buildings should apply, not those for plant and fixtures.

Which sections of the Income-tax Act were involved?

Section 154,Section 32

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 406 of 1983

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE R.BALIA. ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

The order continues below.

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