The Commissioner of Income Tax vs Sanmar Electronics Ltd. (Formerly as Ind Chem Ltd.)

K. Raviraja Pandian, J.—The appeal is filed against the order of the Income Tax Appellate Tribunal Madras ''C'' Bench made in I.T.A. No.

951/Mds/93 dated 28.11.2002. The relevant the assessment year is 1989-90.

The appeal was admitted on the following two substantial questions of law:

Whether in the facts and circumstances of the case, the Tribunal was right in holding that excise duty does not form part of the turnover, for the

purpose of calculation of deduction u/s 80HHC?

Whether in the facts and circumstances of the case, the Tribunal was right in holding that the telecom plant is eligible for the depreciation at the

rate of 50% ?

The facts, which are material for the purpose of the case are as follows:

For the assessment year 1989-90, the assessee filed its return. The assessing officer inter alia restricted depreciation on the telecom plant and

disallowed deduction u/s 80 HHC in respect of excise duty. Aggrieved by the said order of the assessing officer, the assessee filed appeal before

the Commissioner of Income Tax (Appeals), who allowed the appeal in favour of the assessee in respect of both the issue on the reason that the

excise duty would not form part of the turnover and the assessee is entitled to depreciation at 50% on the telecom plant. The correctness of the

same was canvassed by the Revenue before the Tribunal. The Tribunal following its earlier order dismissed the appeal. Hence, the present appeal

has been filed with the questions of law as extracted above.

In respect of the first question of law, it is admitted by the counsel on either side that the issue has already been decided by the Supreme Court

in Commissioner of Income Tax, Coimbatore Vs. Lakshmi Machine Works, against the Revenue to the effect that excise duty paid by the assessee

would not form part of the turnover for the purpose of calculation of deduction u/s 80HHC. Hence, the first question of law has to be necessarily

decided against the Revenue and as such the same is decided.

In respect of the second question of law, it could be seen from the assessment order that the assessee had claimed depreciation on telecom

plant and machinery at 50% under Rule 5(2) of the Income Tax Rules. The said claim has been rejected by the assessing officer on the ground that

the certificate from competent authority as prescribed under Rule 5(2) has not been filed along with the return, but were filed only on 30.3.1992.

Further, it was observed by the assessing officer that the certificate itself was dated 6.2.1991. On that ground the assessing officer did not grant the

benefit of depreciation at the rate of 50%.

Learned Counsel appearing for the respondent made available the certificate issued by the Government of India, Ministry of Science and

Technology, Department of Scientific and Industrial Research. Though the certificate was dated 6.2.1991, the certificate clearly provided that the

certificate was intended only for the purpose of depreciation allowance at the rate of 50% on the plant and machinery installed on 2nd April 1987

under Rule 5(2) of the Income Tax Rules, 1962. , III Amendment Rules. The certificate further provides that the plant and machinery certified

would be treated as a block of assets qualifying for depreciation allowance at the rate of 50% of the written down value. This was subject to the

assessee complying with all the conditions laid down under Rule 5(2) of the Income Tax Rules. Having regard to the fact that the certificate was

issued by the Ministry of Science and Technology by incorporating the reasoning that the certificate was issued for the purpose of claiming

depreciation allowance at the rate of 50% on the plant and machinery installed on 2nd April 1987, we are of the view that the benefit is available to

the assessee. That was the reason for the appellate authority to grant the benefit in favour of the assessee. We find no substance in the appeal.

Hence the tax case appeal is dismissed.