COMMISSIONER OF Income Tax vs HARNARAYAN LOHIA and SONS.

V. N. KHARE, C.J. :

At the instance of the CIT, the Tribunal has referred the following question of law for answer to this Court under s. 256(1) of the IT Act, 1961 :

"Whether, on the facts and circumstances of the case, the Tribunal was justified in law in allowing the assessees appeal against the order of the CIT, West Bengal VIII, Calcutta, passed under s. 263, upholding the order of the CIT(A) who held that the cold storage of the assessee falls within the category of renewable energy devices being solar energy operated cold storage within the meaning of Appendix I, item No. III-D-Machinery and plant, No. (10A)(vii) of Part I of the IT Rules, 1962 ?"

The facts which give rise to the aforesaid question of law are that the assessee is a firm which runs a cold storage. The relevant assessment years involved are 1985-86 and 1986-87. For these two assessments years the AO allowed depreciation on the cold storage plant at the rate of 30 per cent. which was applicable to the plant and machinery or renewable energy device being solar refrigeration cold storage air-conditioning system.

However, the CIT set aside the aforesaid assessment orders under s. 263 of the IT Act, and directed the AO to make a fresh order of assessment for the relevant assessment years. The CIT was of the view that the depreciation allowable to the assessee was at the rate of 15 per cent. and not at the rate of 30 per cent.

Being aggrieved, the assessee preferred an appeal to the Tribunal.

The Tribunal agreed with the view taken by the AO and thus set aside the order of the CIT. Appendix-I of the IT Rules, 1962, provides allowable deduction. Under heading "Plant and Machinery" at item No. (10A) depreciation of 30 per cent is allowable if it is a renewable energy device being a cold storage. Before the Tribunal, a chartered engineer has given a certificate in favour of the assessee which is as follows :

"I hereby certify that cold storages are run by renewable energy devices. In cold storage electrical energy is used to evaporate and liquefy refrigerants like ammonia. The refrigerant liquid ammonia is stored in a vessel called receiver and is passed through expansion nozzle where it suddenly expands, becomes gas and very cool. Then it passes through coils in storage chamber where heat transfer takes place. The liquid ammonia gains heat from the chamber resulting in lowering the temperature inside the storage chamber at desired level for preservation of stored food-stuff. From storage coil ammonia gas at normal temperature is passed through a compressor which is run by electrical energy. The compressed gas becomes hot. Then the hot compressed gas is being passed through cooling coils (water cooling) and then being cold, liquid ammonia passes through receiver. This process is repeated over and again and, accordingly, it is called a renewable device process.

This is in reference to Harnarayan Lohia & Sons, Kaybee Corporation & Century Cold Storage Prop. : Century Laminating Company Ltd., having offices at 5, Alexandra Court, 60/1, Chowringhee Road, Calcutta 700 020.

Sd. K. N. Kumar,

Chartered Engineer F 2124 Registered

Valuer CAT VII 116."

Relying upon this certificate, the Tribunal found that the assessees cold storage is run by a renewable energy device and as such was entitled to depreciation at the rate of 30 per cent. The finding of the Tribunal is based on materials on record and it cannot be called arbitrary or perverse.

In view of the finding recorded by the Tribunal, we answer the question in the reference in the affirmative, in favour of the claimant and against the Revenue.

Let our opinion be transmitted to the Tribunal forthwith.

There will be no order as to costs.