Commissioner of Income Tax vs Sal Udyog Limited

This is a reference u/s 256(1) of the Income Tax Act at the instance of the Revenue and the following question of law has been referred by the Tribunal for the answer of this court :

"Whether, on the facts and under the circumstances of the case, the Tribunal was right in cancelling the order passed by the Commissioner of Income Tax u/s 263 of the Income Tax Act, holding that the assessment order passed by the Assessing Officer for the assessment year 1982-83 was erroneous and prejudicial to the interests of the Revenue ?"

The brief facts giving rise to this reference are thus : The assessee-company is engaged in the manufacture of oil from sal seeds. It claimed depreciation on the machinery which was exposed to corrosive substance. The Assessing Officer held that the assessee will be entitled to the depreciation at the special rate of 15 per cent. Thereafter the Commissioner u/s 263(1) of the Income Tax Act, found that the order passed by the Assessing Officer is prejudicial to the interests of the Revenue, therefore, he gave a notice for reassessment that the whole plant and machinery is not exposed but some are exposed and hence all plant and machinery are not entitled to 15 per cent. depreciation. Aggrieved by this order, the matter was taken up before the Tribunal and the Tribunal after considering the matter found that the order passed by the Income Tax Officer by allowing 15 per cent. depreciation is justified. Hence, an application was made by the Revenue before the Tribunal for sending a reference to this court and the aforesaid question of law has been referred by the Tribunal to this court for answer.

We have heard learned counsel for the Revenue and perused the records. The view taken by the Income Tax Officer that the plant and machinery come into contact with corrosive chemicals appears to be proper ; therefore, the Tribunal came to the conclusion that the grant of 15 per cent. depreciation cannot be said to be wholly unwarranted. It is a question of fact and no question of law does arise. Hence, we answer the aforesaid question in favour of the assessee and against the Revenue.