Bindal Sugar Works vs Commissioner Of Income Tax.
1989 Latest Caselaw 290 Del

ORDER

Per Shri S. K. Chander, Accountant Member - By this reference application, the assessed is before us with a prayer that the following question, said to be question of law and said to arise out of the consolidated order to the Tribunal bearing ITA Nos. 5699/DEL/85 and 74/DEL/86 dated 14-6-1988 be referred to the Honorable court :

"Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in not allowing grant of depreciation @ 30 per cent on generator ?"

2. We have heard the parties, The Tribunal in its order observed that in a number of cases, the Delhi benches on similar set of facts had taken the view that depreciation at 25 per cent on generator is admissible. In our considered opinion, this does not give rise to a referable question of law. Reference application is, therefore, dismissed.

Per Shri S. S. Mehra, Judicial Member - Draft order prepared by my learned Brother has carefully been gone into but it is regretted that I failed to agree with the conclusion arrived at therein. In my considered view a referable question of law does indeed arise from the Tribunal order. I therefore, proceed to prepare a draft statement of the case for making a reference of the question raised by the applicant.

2. assessed in this case by status by status is a registered firm engaged in the running of a Khandsari industry and maintaining accounts on mercantile basis. Accounting period was the year ending 14-8-1938. assessed claimed depreciation at 30 per cent on generator but the learned IAC [Asstt.] allowed only at 15 per cent with the following.

"Depreciation on generator has been allowed only at 15 per cent as it is run by diesel only and cannot be covered under point No. 10[xiii] of Appendix of IT Rules, 1962 which is applicable in the case of generator and pump run on wind energy. Learned CIT [A] has also held in case of M/s. Ghanshyma Sugar Factory that depreciation on generator is not allowable at 30 per cent."

Copy of the assessment order dated 28-3-1985 is marked as Annexure A and forms part of the statement of the case.

3. The issue was contested by the assessed and the learned CIT [A] making mention of order dated 12-2-1985 for the assessment years 1982-83 and 1983- 84 decided the issue in favor of the assessed and directed the learned IAC [Asstt.] to modify the assessment accordingly.

A copy of the first appellate order dated 12-9-1985 is marked as Annexure B and forms part of the statement of the case.

4. The issue was thereafter contested by the revenue and the Bench making mention of some decisions of the Delhi Benches of the ITAT directed that depreciation on the generator would be admissible at 20 per cent in place of 30 per cent claimed and 15 per cent allowed.

A copy of the Tribunals order dated 14-6-1988 is marked as Annexure C and forms part of the statement of the case.

5. From the facts narrated in the preceding paragraphs a referable question of law as suggested by the applicant does indeed arise for making reference. I do accordingly.

ORDER UNDER SECTION 255[4] OF THE INCOME-TAX ACT, 1961.

In this case, we have the following difference of opinion :

"Whether on the facts and in the circumstances of the case, a referable question of law arises out of the order of the Tribunal, bearing ITA No. 5699/DEL/1985 and ITA No. 74/DEL/1986 dated 14-6-1988 ?"

In view of the above, we refer the case under section 255[4] of the Income- tax act, 1961 to the Honorable President for its reference to a Third Member.

THIRD MEMBER ORDER

Per Shri Ch. G. Krishnamurthy, president - On a difference between the learned Members of C Bench, Delhi as it then constituted, the following point was referred to me as a Third Member :

"Whether, on the facts and in the circumstances of the case, a referable question of law arises out of the order of the Tribunal bearing ITA No. 5699/DEL/85 and ITA No. 74/DEL/86 dated 14-6-1988 ?"

2. The assessed in this appeal is a firm, running a khandsari sugar factory at Moradabad. It had installed a generator to generate electric power to run its industry. It claimed depreciation on this generator at 30 per cent. The IAC [Assessment], Moradabad who made the assessment allowed depreciation there on only at 15 per cent by observing that the narrator was run only by diesel and could not be covered under point No. 10 [xiii] of Appendix of Income tax Rules, 1962, which in his opinion was applicable only in the case of generators and pumps run on wind energy. Against the decision of the IAC [assessment], an appeal was filed before the commissioner of Income-tax. The CIT Bareilly, following his earlier order for the assessment years 1982-83 and 1983-84 allowed depreciation at 30 per cent and directed the IAC to modify the assessment.

3. Aggrieved by this order of the CIT, the revenue filed an appeal before the Income tax Appellate Tribunal. The Bench of the Tribunal unanimously declared that the depreciation allowable on generators was neither 15 per cent nor 30 per cent but only 20 per cent. For this view, it relied upon the decisions given by Delhi Benches in a large number of cases. Thus the ground of the revenue was partly allowed.

4. Thereafter the assessed filed a reference application stating that the following question of law arises from the order of the Tribunal and that should be referred to the Honorable High court for its opinion :

"Whether on the facts and in the circumstances of the case the Tribunal erred in law in not allowing grant of depreciation @ 30 per cent on generator ?"

The learned Accountant Member declined to refer the question to the Honorable High court on the ground that the order of the Tribunal did not give rise to a question of law, whereas the learned Judicial Member held that a referable question of law arose out of the order of the Tribunal.

5. Now the point is whether the order of the Tribunal gave rise to a question of law. In my opinion, the order of the Tribunal does give rise to a question of law because it was not possible to come to a conclusion that depreciation on generators was allowable at 20 per cent as against 30 per cent allowed by the CIT and 15 per cent allowed by the IAC [Assessment] unless and without interpreting the rules governing the grant of depreciation. The grant of depreciation is allowable under section 32 of the Income tax act, read with rule 5 of the Income tax Rules, 1962. Rule 5 stipulates that subject to the provisions of sub rules [2] and [3] allowance of depreciation under section 1 of section 32 of the respective assets shall be calculated at the percentages specified in the second schedule of the Table in part I of Appendix I to these rules on the actual cost or as the case may be the written down value of such assessed aforesaid as are used for the purposes of business or profession of the assessed at any time during the previous year. This rule 5 makes a reference to the Appendix I a must to find out the percentages at which depreciation is to be allowed. Appendix I lists the various types of machinery that is entitled to depreciation and under article 10[xiii] it states that any special device including electric generators and pumps run on wind energy will be entitled to depreciation at 30 per cent. It was under this head that the assessed claimed depreciation at 30 per cent which the cit allowed but which the Tribunal reduced to 20 per cent. In reducing the rate of depreciation from 30 per cent to 20 per cent. it did interpret the applicable rule on the percentage and it could not have come to this conclusion otherwise than by interpreting the rule. It is now settled law that a decision reached by the Tribunal on the interpretation of a statutory rule gives rise to a question of law. For this reason, I am of the opinion that the order of the Tribunal does give rise to a question of law.

6. The matter will now go before the regular Bench for the disposal of the reference application in accordance with the opinion of majority.