COMMISSIONER OF INCOME TAX Vs. RAKESH COLD STORAGE

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, Allahabad has referred the following question of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion to this court : "Whether on the facts and in the circumstances of the case, the Tribunal was legally correct in upholding the Appellate Assistant Commissioner's order directing the Income-tax Officer to work out depreciation for the assessment year 1978-79 by adopting the W.D.V. as per the assessment order for the assessment year 1977-78 dated June 3, 1978 ?"

(2.) Briefly stated, the facts giving rise to the present reference are as follows : The present matter relates to the assessment year 1978-79. The respondent-assessee is a registered firm and ran a cold storage, called M/s. Rakesh Cold Storage. It maintained its account on mercantile basis. It purchased a generator for Rs. 2,18,035 on November 17, 1974, falling in the assessment year 1976-77. The Income-tax Officer had allowed depreciation of Rs. 21,803.00 at 10 per cent. on the total cost of the generator. Subsequently, it was found that the respondent-assessee had received subsidy, sanctioned vide order dated October 18, 1975, amounting to Rs. 30,000 on January 15, 1976, Rs. 24,075.00 on August 30, 1976 and Rs. 54,075.00 on March 13, 1978, total Rs. 1,08,150, from the U. P. Financial Corporation towards the purchase of the generator. The Department was of the view that though the subsidy was received in different years, it had actually accrued to the respondent-assessee immediately when the generator was installed. The Commissioner of Income-tax initiated proceedings under Section 263 of the Act and the assessment for the assessment year 1976-77 was cancelled vide his order dated January 2, 1980 directing the Income-tax Officer to work out the cost of the generator for the purposes of depreciation after deducting the amount of subsidy receivable from the U. P. Financial Corporation. The respondent-assessee appealed to the Tribunal who vide order dated December 26, 1980 cancelled the order of the Commissioner of Income-tax that he had no jurisdiction to revise the order of the Income-tax Officer as the same had merged in the order of the Appellate Assistant Commissioner, dated December 5, 1979. The Department filed a reference application under Section 256(1) of the Act against the said order dated December 26, 1980, which was referred to this court on June 7, 1984. Meanwhile the Income-tax Officer revised the assessment for the assessment years 1976-77, 1977-78 and 1978-79 and determined the cost of the generator by reducing it by the amount of subsidy received and allowed depreciation on such reduced amount. This order was cancelled by the Appellate Assistant Commissioner following the order of the Tribunal dated December 26, 1980. Departmental appeals against this order were dismissed by the Tribunal vide order dated February 11, 1983, against which reference applications under Section 256(1) of the Act were filed by the Department and the matter was referred on April 6, 1984.

(3.) For the assessment year 1978-79 (account period being December 24, 1976 to December 31, 1977), original assessment was made on June 23, 1979 wherein depreciation was allowed as under : Rs. Generator cost 2,48,035.00Less: Subsidy on accrued basis 1,08,150.00 1,39,885.00Less : Depreciation for the assessment year 1976-77 at 10% 13,988.00 1,25,897.00Less : Depreciation for the assessment year 1977-78 12,589.00 1,13,308.00Depreciation allowed for the assessment year 1978-79 11,330.00