Madhya Pradesh High Court
Dy. Cit, Special Range-2 vs Vippy Solvex Products Ltd. on 29 March, 2007
Author: J.K. Maheshwari
Bench: J.K. Maheshwari
ORDER S.K. Kulshrestha, J.
1. This appeal shall also govern the disposal of ITA No. 4/2004 in which the controversy involved is the same except that the said appeal relates to the yeair 1994-95, while this appeal relates to the assessment year 1993-94. Both the appeals have been admitted on the following substantial questions of law:
(1) Whether Tribunal was justified in granting the benefit to the assessee towards depreciation @ 100 per cent on the automatic coal supply system treating it to be a part and parcel of the boiler ?
(2) Whether system in question ie., automatic coal supply can be treated as part and parcel of the boiler for the purpose of granting benefit of depreciation @ 100 per cent to the assessee ?
(3) Whether the assessee is entitled to claim depreciation @ 25 percent on certain items or @ 100 per cent treating it to be a boiler for the purpose of claiming depreciation @ 100 per cent ?
2. As per the Appendix I of Schedule I, Entry No. (3)(m) of the Income-tax Rules, 100 per cent depreciation has been provided for Energy saving devices enumerated therein. The Entry reads as follows ;
(3)(i)and(ii)
(iii) Energy saving devices, being A. Specialised boilers and furnaces:
(a) Ignifluid/fluidized bed boilers
(b) Flameless furnaces and continuous pusher type furnaces
(c) Fluidized bed type heat treatment furnaces
(d) High efficiency boilers (thermal efficiency higher than 75per cent in case of coal f ired and 80 per cent in case of oil/gas fired boilers).
3. The appeal relates to the depreciation provided on the boilers and furnaces in Clause (d) relating to the high efficiency boilers (thermal efficiency higher than 75 per cent in case of coal fired and 80 per cent in case of oil/gas fired boilers).
4. The core question which has been raised by the learned Counsel for the revenue is that although High efficiency boilers in the assessee's concern is entitled to 100 per cent depreciation, including the insulation material to preserve the heat, the other components such as coal container, coal conveyer, bucket elevator, dust collecting system qualify for 25 per cent depreciation and the Commissioner (Appeals) and Tribunal have, both, committed a patent error in setting aside the order of the assessing officer, declining 100 per ent depreciation on the abovesaid items. Learned Counsel for the department contends that the items for which now depreciation is being claimed at 100 per cent, are not the integral part of the boiler in order to become eligible for 100 per cent depreciation.
5. Learned Counsel for the respondent-assessee, per contra, has pointedout that the coal container, coal conveyer, bucket elevator and dustcollecting system can have no independent existence and it is for the purposes of modernisation and automation that these items were pur-chased and attached to the boiler and since they become an integral and inseparable part of the boiler, without having any utility otherwise, they are also entitled to depreciation at the rate of 100 per cent.
6. We have heard the learned Counsel for the parties and perused therecord. As per the facts of the case, as revealed in ITA No. 132/2003,the assessee is a Public Limited Company which filed return for theassessment year 1993-94 on 30-12-1993 indicating taxable income of Rs. 2,25,71,671. The assessment was completed under Section 143(3) and income was determined in the sum of Rs. 41,68,560. The Company is engaged in the manuf acture of Soya Oil in which it had installed a fluidized bed type boiler in the assessment year 1992-93. Thereafter the Company procured coal container, coal conveyer, bucket elevator and dust collecting system for better utilisation of the boiler and claimed 100 per cent depreciation Ie., Rs. 48,84,796. Except for the insulating material, the Assessing Of f icer by his order dated 26-2-1996, rejected the claim for 100 per cent depreciation. The assessee appealed to the Commissioner (Appeals) against the order of the assessing officer and the appeal was allowed. Further appeal to the Income Tax Appellate Tribunal was dismissed by the Tribunal in the light of the judgment of the Hon'ble Kerala High Court in CIT v. Cochin Refineries Ltd. . The Tribunal observed that the observation of the assessing officer was conjectural as utility of an item should not be examined in isolation and the nature shall depend on the function for which its is used. It also observed that there was no doubt that the boiler will not function in the absence of coal supply system and, therefore, the Tribunal agreed with the Commissioner (Appeals) that the coal supply system was a part and parcel of the boiler and the entire coal system is entitled to depreciation at the rate of 100 per cent.
7. Cochin Refineries Ltd.'s case (supra), the claim was made for depreciation in respect of waste ponds, fresh water tank, pipe racks, alloy piping, jetty facilities, cherry pieker cranes, etc, as part of the Refinery. The claim was turned down by the Assessing Authority but the High Court, on the question being raised before it, came to the conclusion that the waste ponds, fresh water tank, pipe racks, alloy piping, jetty facilities, cherry piker cranes, etc, formed an integral part of the Refinery and it was entitled to a higher rate of depreciation and development rebate in that respect. In the case in hand, it has not been shown by the revenue that coal container, coal conveyer and bucket elevator, dust collecting system can individually be utilised f or any other purpose. Apart from the f act. that there was no other purpose for the use of this machinery in the assessee's Company, the further fact that these were integral components of the boiler, strengthens the view that they also become eligible to 100 per cent depreciation as was allowed in the case of Cochin Refineries Ltd. (supra). We are, therefore, of the view that the questions formulated in this case should be answered in favour of the assessee and against the revenue. We accordingly hold that the Tribunal did not err in extending benefit to the assessee towards depreciation at the rate of 100 per cent on the automatic coal system, treating it to be a part and parcel of the boiler, and that on these items the assessee was not required to restrict its claim to 25 per cent.
8. In the result both these appeals are dismissed, but with no order as to costs.