A.C.I.T. vs. RAVI CONSTRUCTION

This is an appeal by the appellant- Revenue, seeking to challenge the order of the learned ITAT, Ahmedabad Bench ‘C’ (for short, ‘the Tribunal’), Dated : 01.02.2002, rendered in ITA No. 2405/AHD/1996 for the A.Y. 1991-92, whereby, the Tribunal dismissed the appeal of the Revenue.

The brief facts of the case are that the Respondent-assessee, filed its return of income on 15.05.1992, declaring total income at Rs.11,90,459/-. Pursuant thereto, the case of the assessee was examined and the concerned AO, after making certain additions / disallowances, assessed the income of the assessee at Rs.21,44,109/-. The assessee, hence, approached the CIT(A), who partly allowed its appeal. Being aggrieved with the same, the Revenue approached the Tribunal by way of appeal, wherein, the Tribunal passed the impugned order, as referred to in Para-1, herein above. Hence, the present appeal.

At the time of admitting the present appeal, this Court framed the following questions of law; “(1) Is centering material to be viewed as “block of assets” for the purpose of allowing deduction in respect of depreciation under section 32(1)(ii) of the Income-tax Act, 1961? (2) Is depreciation allowable at the rate of 100% on the centering material as against normal rate of depreciation at 33.1/3% for plant and machinery?”

Mr. Mehta, learned Advocate for the appellant-Revenue, submitted that the Tribunal erred in passing the impugned order, inasmuch as it failed to appreciate the material on record in its proper perspective. He submitted that the CIT(A) and the Tribunal ought to have held that the AO was justified in disallowing the claim of the assessee for 100 per cent depreciation. He, further, submitted that the Tribunal ought to have followed the latest decision on the subject- matter.

In support of his case, Mr. Mehta placed reliance on a decision of the Andhra Pradesh High Court in “CIT VS. VIJAYA ENTERPRISE” and the allied matters, [2011] 332 ITR 235 (AP, wherein, the Andhra Pradesh High Court, defining the term ‘construction industry’, observed that each item of shuttering material does not form the plant and thereby held that the assessee, therein, was not entitled to 100 per cent depreciation under First Proviso to Section 32(1)(ii) of the Income Tax Act, 1961. He, therefore, prayed that the present appeal be allowed.

On the other hand, Mr. Shah, learned Advocate for the assessee, supported the orders of the learned CIT(A) as well as the Tribunal and submitted that the Tribunal committed no error in confirming the order of the CIT(A). In support of his submissions, Mr. Shah placed reliance on the following decisions; “CIT VS. ALAGENDRAN FINANCE LTD.”, [2003]264 ITR 0269 (Madras High Court); “CIT VS. MOHTA CONSTRUCTION CO.”, [2005] 273 ITR 0276 (Rajasthan High Court); “CIT VS. DHALL ENTERPRISES AND ENGINEERING P. LTD.”, [2006] 287 ITR 435 (Gujarat); “CIT VS. ANSAL HOUSING FINANCE AND LEASING”, [2013] 354 ITR 0180 (Delhi High Court);

Mr. Shah relying on the decision of this Court in “CIT VS. DHALL ENTERPRISES AND ENGINEERING P. LTD.”, submitted that this Court, in Paras-12 & 13 of the aforesaid decision, observed and held as under; “12. It is settled position in law that proviso is normally used as a legislative tool to carve out an exception from the main provision which precedes the proviso. The first proviso makes it clear that in case of the machinery or plant whose actual cost does not exceed the specific monetary ceiling,such asset would not enter the block of assets and hence, there would be no occasion to work out such percentage of the written down value/actual cost. If the view canvassed by the revenue is accepted, this would go against the legislative intent.

There is one more reason. The third proviso itself requires to restrict the depreciation allowance at 50 % of the amount calculated at the percentage prescribed under clause (ii) of Section (1) of Section 32 of the Act. As already noticed, the asset does not enter the block of assets and hence, there is no question of working out

In the case on hand, while dismissing

In the result, present appeal fails and is DISMISSED, as being without merit. The questions of law framed in this appeal, i.e. (1) Is centering material to be viewed as “block of assets” for the purpose of allowing deduction in respect of depreciation under section 32(1)(ii) of the Income-tax Act, 1961? and (2) Is depreciation allowable at the rate of 100% on the centering material as against normal rate of depreciation at 33.1/3% for plant and machinery?, are answered AGAINST the appellant-revenue and in FAVOUR of the respondent-assessee, accordingly. No order as to costs. (K.S.JHAVERI, J.) (K.J.THAKER, J) UMESH