Commissioner of Income Tax vs Sir Shadi Lal Enterprises

The Department has sought to refer the following two questions of law :

"(1) Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was legally correct in quashing the order of the Commissioner of Income Tax (Appeals) holding that the sale proceeds of scrap value are not taxable ?

(2) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in holding that the sale proceeds of scrap value amounting to Rs. 23,53,206 are not deductible from the actual cost of the block of assets to arrive at the figure of written down value for allowing depreciation on that asset in view of the provisions of Sections 43(1), 43(6) read with Section 43(6)(c) of the Income Tax Act, 1961 ?"

The relevant facts are that the assessee had sold the scrap generated during the course of its business and the sale proceeds thereof at Rs. 23,53,206 were offered as its taxable income. The Assessing Officer held that such sale proceeds were not taxable in nature. However, as the same stood offered by the assessee as its taxable income, the Assessing Officer maintained the addition while working out the taxable income of the assessee. The assessee raised ground No. 8 in its grounds of appeal taken before the Tribunal. The Tribunal upheld the order of the Commissioner of Income Tax (Appeals).

The Department has filed an application for referring two questions referred to above. The application has been rejected by the order dated June 4, 1997. The Department has sought reference again on these questions of law.

We have heard Sri Prakash Krishna, learned counsel for the Department, and Sri Rajesh Kumar, learned counsel appearing for the assessee.

After hearing the matter, we are of the opinion that question No. 1 does not arise from the order of the Tribunal. As regards question No. 2, the contention of learned counsel for the Department is that the scrap value amounting to Rs. 23,53,206 is not deductible from the actual cost of the block of assets to arrive at the figure of written down value for allowing depreciation on that asset in view of the provisions of Sections 43(1), 43(6) read with Section 43(6)(c) of the Income Tax Act, 1961. The Tribunal noted the arguments but it has not conclusively decided the matter.

In view of the above, we ask the Tribunal to refer question No. 2 as indicated above.

The application is, accordingly, disposed of.