Facts of the Case

  1. The assessee, M/s J.K. Synthetics Ltd., claimed depreciation at the rate of 15% on plant and machinery used in cement manufacturing and packaging activities.
  2. The Assessing Officer allowed depreciation only at the rate of 10%.
  3. The Commissioner of Income Tax (Appeals) granted depreciation at 15%, relying upon earlier Tribunal decisions in the assessee’s own cases.
  4. The Income Tax Appellate Tribunal upheld the order of the Commissioner (Appeals) and followed its earlier decisions relating to Assessment Years 1975-76 to 1983-84.
  5. The Revenue preferred a reference before the Delhi High Court challenging the Tribunal's decision.

Issues Involved

Whether the assessee was entitled to depreciation at the rate of 15% on plant and machinery used in the manufacturing and packaging of cement, or whether depreciation should be restricted to 10% as determined by the Assessing Officer.

Petitioner’s (Revenue's) Arguments

  1. The Commissioner of Income Tax contended that depreciation on the concerned plant and machinery should be allowed only at the rate of 10%.
  2. The Revenue challenged the Tribunal’s decision granting depreciation at the higher rate of 15%.

Respondent’s (Assessee's) Arguments

  1. The assessee relied upon earlier decisions of the Income Tax Appellate Tribunal rendered in its own cases for previous assessment years.
  2. It was submitted that the Tribunal had consistently allowed depreciation at the rate of 15% on the same category of plant and machinery.
  3. The assessee further pointed out that a reference concerning Assessment Year 1975-76 had already been returned unanswered due to insignificant tax effect.

Court Findings / Order

  1. The Delhi High Court noted that the Income Tax Appellate Tribunal had followed its earlier decisions rendered in the assessee's own cases.
  2. The Tribunal had already allowed depreciation at the rate of 15% on the plant and machinery used in cement manufacturing and packaging activities.
  3. The Court recorded the submission that the reference relating to Assessment Year 1975-76 had been returned unanswered because of the insubstantial tax effect involved.
  4. Since the present matter related to Assessment Year 1977-78 and similar considerations applied, the Court found no reason to interfere.
  5. Accordingly, the reference was returned answered.

Important Clarification

  1. The judgment primarily reiterates the principle of consistency where an issue has already been decided in the assessee’s own cases for earlier years.
  2. The Court did not undertake a fresh determination of the depreciation rate but noted and accepted the Tribunal’s reliance on its earlier decisions.
  3. The decision also reflects the judicial approach in matters involving insignificant tax effect.

Sections Involved

  • Section 256 of the Income-tax Act, 1961 (Reference Jurisdiction before the High Court)
  • Depreciation provisions under the Income-tax Act, 1961 and the applicable Depreciation Schedule governing plant and machinery.

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2010:DHC:4035-DB/AKS16082010ITR211992.pdf

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