REHABILITATION PLANTATIONS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The appellant is engaged in the business of manufacture and sale of centrifuged latex and rubber. The appeal is concerned with assessment for the year 2002-2003 when Rule 7A was introduced in the Income Tax Rules, 1962 ('Rules', for short). The appellant's income then assessed under the Kerala Agricultural Income Tax Act, 1991 ('AIT Act', for short) of the State, was assessable under the Income Tax Act, 1961 ('IT Act', for short) to the extent of 35% of such income, which as per Rule 7A is deemed to be income liable to tax. The issue arises as to the depreciation allowable to the assessee.

(2.) The questions of law arising from the order of the Income Tax Appellate Tribunal (for short, 'Tribunal') as available in the memorandum of appeal are as follows:-

(3.) The assessee claimed depreciation of the entire cost of the plant and machinery to the extent of 35% treating it as the actual cost allowable on which is computed the allowable deduction for depreciation. The Assessing Officer found that the appellant had been providing for depreciation on assets used for the agricultural operations, in the profit and loss accounts prepared as per the Companies Act, 1956. The depreciation on assets used in the plantations, including for manufacturing activity, was found to have been claimed by the assessee-Company for more than two decades. It was found that earlier the assessments have not been taken under the IT Act, since the entire income was assessable under the AIT Act. It was found that as per Section 32(1) of the IT Act, depreciation on building, machinery, etc. is to be allowed on the written down value of the assets, owned by the assessee and used for the purposes of the business.