COMMISSIONER OF INCOME TAX Vs. VIJAYA ENTERPRISES

JUDGEMENT

(1.) The case referred by the Income Tax Appellate Tribunal, Hyderabad, under Section 256(1) of the Income Tax Act, 1961 (the Act), is at the Revenue's instance. The question referred, namely, whether on the facts and circumstances of the case, the Tribunal was justified in directing to allow depreciation at 100% on centering and shuttering material (hereafter referred to as shuttering material) is also the question that arises in the three appeals; two of which are filed by the assesses and the third by the Commissioner of Income Tax, Visakhapatnam.

(2.) The factual background in the referred case is as follows. The Assessee firm is a civil contractor. In their return for 1986-87, they claimed depreciation at 100% on Rs. 3,18,520/- towards purchase value of centering and shuttering equipment. Their plea was that the cost of each item was below Rs. 5,000/-. The Assistant Commissioner-2, Visakhapatnam, allowed 15% depreciation. The Appellate Commissioner of Income Tax reversed the order of the assessing officer agreeing with the Assessee that each item of centering, shuttering and scaffolding material costs less than Rs. 5,000/- and, therefore, they are entitled to claim depreciation @ 100% under Section 32(1)(ii) proviso. The learned Tribunal confirmed the appellate order, dismissed the Revenue appeal, and, thereafter, a reference was sought.

(3.) ITTA Nos. 149 and 124 of 2005 are by M/s. Navayuga Engineering Company Ltd., (Navayuga, for short) for the assessment years 1993-94 and 1995-96 respectively. The other appeal ITTA No. 20 of 1999 is by the Commissioner of Income Tax, Visakhapatnam. For completing the background of the cases, we may also refer to the facts in Revenue appeal as well as the appeal by Navayuga. The Assessee is a registered firm engaged in civil contracts. For 1993-94, they filed return of income of Rs. 12,85,780/-. During scrutiny, the assessing officer determined their income at Rs. 65,45,360/- after disallowing 1% of the total expenditure under various heads. However, in view of the subsequent objection, the Commissioner revised the order under Section 263 of the Act directing the assessing officer to allow 25% depreciation on the value of shuttering material used for more than 180 days, and to restrict depreciation to 12.5% on the value of shuttering material used for less than 180 days. A consequential order was passed on 28.9.2007 restricting the depreciation. In the Assessee's appeal, the learned Tribunal set aside the Commissioner's order and restored the order of the assessing officer allowing 100% depreciation on shuttering sheets. Aggrieved thereby the Revenue filed appeal.