COMMISSIONER OF INCOME TAX Vs. SUPER DRILLERS

JUDGEMENT

(1.) THE Tribunal, Hyderabad Bench, makes this reference under S. 256(1) of the IT Act, 1961, for the income -tax asst. year 1979 -80. Two questions are referred for the consideration of this Court and they are extracted below :

(2.) THE assessee is a partner -ship firm carrying on business in drilling borewells (tube -wells). For the purpose of drilling borewells, the assessee, inter alia, used a rig and compressor of the value of Rs. 3,77,965. The assessee claimed that it is entitled to depreciation on the value of the rig and compressor at 30 per cent relying on the depreciation rate specified against item D(7) of the Depreciation Schedule (Appendix 1, Part I to the IT Rules). The assessee's claim was that the rig used for the purpose of drilling answered the description specified against item D(7) which is as under:

(3.) IF the assessee is entitled to claim depreciation under this head, there is no dispute that depreciation calculated at 30 per cent of the cost of the machinery is allowable as deduction. No extra shift allowance is allowable. The ITO did not accept the assessee's claim. He was of the view that the depreciation at the rate of 30 per cent on rigs could be allowed only if the rigs are used by mineral oil concerns and not by others. As the assessee is not a mineral oil concern, the ITO felt that there is no specific head under which depreciation could be allowed on the rig used for drilling borewells. Accordingly, the ITO held that the assessee is entitled to claim depreciation at the general rate applicable to plant and machinery, which at the relevant time, was 10 per cent subject to extra shift allowance for double shift and triple shift. Accordingly, the ITO allowed the depreciation at 10 per cent in computing the assessee's income for the asst. year 1979 -80. The assessee was aggrieved by the decision of the ITO and carried the matter to, the CIT (A). The learned Commissioner agreed with the view of the ITO and dismissed the appeal. Thereupon a second appeal was filed by the assessee before the Tribunal and it reiterated its claim for depreciation at 30 per cent. The Tribunal considered the matter at considerable length and held the view that although the rig used by the assessee for drilling borewells does not answer the description against item D(7), it answers the description against item D(4) which is in the following terms: