Income Tax Appellate Tribunal - Kolkata
Indo-Asahi Glass Co. Ltd. vs Deputy Commissioner Of Income-Tax on 10 September, 1992
Equivalent citations: [1992]43ITD728(KOL)
ORDER
R.V. Easwar, Judicial Member
1. These two appeals one by the assessee and the other by the department relate to the assessment year 1984-85 for which the previous year ended on 31-12-1983.
2. We shall take up the assessee's appeal first. The appeal is against the order of the Commissioner of Income-tax passed under Section 263 of the Income-tax Act, on 27-3-1989. The assessee is a company manufacturing glass. In the assessment completed originally under Section 143(3) of the Act, The Income-tax Officer had accepted the assessee's claim for depreciation on gas cylinder @ 100 per cent. The Commissioner initiated action under Section 263 of the Act on the ground that the Income-tax Officer was wrong in allowing the assessee's claim for depreciation at 100 per cent on the item of machinery described as "LPG Gas tank cylinder". He was of the view that gas cylinders are portable articles, whereas what the assessee has installed in the factory was gas storage tank which was a permanent installation on which the special rate of depreciation at 20 per cent of the cost was allowable and-,that in so far as the Income-tax Officer had accepted the assessee's claim for depreciation @ 100 per cent, the assessment was erroneous and prejudicial to the interests of the revenue. The assessee objected to the proposal to revise the assessment under Section 263. It was pointed out that what was installed was a big container of LPG Gas and, since it was very big, it was described as a storage tank. It was further pointed out that the storage tank merely, because, it was a big tank cannot cease to be gas cylinders, because, the relevant entries in the depreciation schedule which granted depreciation at 100 per cent for LPG Gas cylinders merely refer to the shape of the tank and do not expressly specify that the tank should be "portable" cylinders or it should be of small size. It was also contended that even though the storage tank is not portable, the assessee was entitled to the claim which was rightly allowed in the assessment.
3. After considering the assessee's objections, the CIT took the view that since the word "cylinder" had not been defined under the Income-tax Act, its meaning has to be gathered in accordance with common parlance. He was of the view that normally, gas cylinders are understood to be portable. He noticed that in the case of the assessee, the gas cylinder was actually a big storage tank containing gas and the same was a permanent concrete installation on which depreciation @ 20% only is permissible. He therefore, over-ruled the assessee's objections and directed the Income-tax Officer to withdraw the 100 per cent depreciation allowed in the assessment and further directed him that only 20 per cent depreciation should be allowed.
4. Before the CIT, the assessee had raised an alternative argument that if 100 per cent depreciation is not allowed, the ITO should be directed to allow extra-shift depreciation and also investment allowance under Section 32A on the LPG Gas cylinder. This alternative contention was directed by the CIT to be considered by the ITO while giving effect to the order passed under Section 263 of the Act.
5. The assessee in appeal before us, contended that the CIT erred in assuming that gas cylinder should be portable in order to be entitled to depreciation @ 100 per cent. It was further pointed out that the CIT erred in his conclusion that the storage tank containing gas was a permanent concrete installation. It was pointed out, with reference to certain photographs of the gas storage tank, that only the columns which supported the LPG Gas cylinder were of concrete and the cylinder itself was made only of metal. The cylinder was placed on top of the concrete columns and it is not impossible to remove the cylinder when the need arises. It was further pointed out that the photographs itself shows that the storage tank was cylinderical in shape and that was the requirement of the relevant entry in the depreciation schedule and it does not matter that the cylinder was very big in size and was not easily portable. The ld. counsel for the assessee also drew our attention to the decision of the Delhi High Court in CITv. National Air Products Ltd. [1980] 126 ITR 1964 Taxman 309., specially the observation of the Court appear at page 201 of the report. On these submissions, it was contended that the assessee was rightly granted depreciation @ 100 per cent in respect of the LPG Gas tank.
6. The Ld. Departmental Representative supported the order of the CIT. He pointed out that item-5 under the head "C" under the main head "Machinery and Plant" granted depreciation of only 20 per cent in respect of glass manufacturing concern except direct fire glass melting furnace. He further drew our attention to item-5 under sub-head "F" under the main head "Machinery and Plant" under which only direct fire glass melting furnace installed in a glass manufacturing concern was entitled to depreciation at 100 per cent. The immediately previous item (4) granted depreciation @ 100 per cent on "gas cylinder including valves and regulators". According to the Ld. DR. item C-5 and item F-5 together exhaust the depreciation allowable in respect of the entire plant and machinery installed in glass manufacturing concern. According to him. only direct fire glass melting furnace gets depreciation at 100 per cent. The cylinder owned by the assessee-company forms part of the machinery installed in the assessee's glass manufacturing concern and this was eligible for depreciation only @ 20 per cent under item C-5. He therefore submitted that the CITs order should be upheld.
7. We have carefully considered the rival submissions. We have also gone through the Paper Book filed by the assessee which contains the colour photographs of the item of machinery which is in dispute. From the photographs, we find that the item is described by the inscription of the word in the body of cylinders itself as "LPG Cylinder, capacity 30 MT'. The cylinder is placed on top of two concrete columns of approx, 5' height. The cylinder itself appears to be about 50' in length. We find, pipe-lines going out of the cylinder and there are also valves on top of the cylinder. There is a ladder which goes right to the top of the cylinder, probably to enable checking of the storage level in the tank. The relevant entry in the depreciation table which is relied on by the CIT and the Ld. DR before us is as under :
III - Machinery and Plant -
C-5 Glass manufacturing concern except direct fire glass melting furnaces - Recuperative and regenerative glass melting furnaces:
Sub-head F describes - Machinery on which 100 per cent depreciation is allowable. Item-5 is as under :
Glass manufacturing concern - direct fire glass melting furnaces.
We are unable to accept the submissions of the Ld. DR that these two entries taken together exhaust the machinery installed in glass manufacturing concern. The first entry mentioned above, prescribes a special rate for recuperative and regenerative glass melting furnaces. The special rate is 20 per cent. This is called special rate, since the general rate applicable to machinery and plant for which no special rate is prescribed is 15 per cent. There are certain other items of machinery, which are eligible for the special rate of depreciation. All the items of machinery for which special rates are prescribed are mentioned in sub-head A to F, Item F-5, prescribes a special rate of 100 per cent depreciation for direct fire glass melting furnaces which have been excluded from the entry which prescribes a special rate of 20 per cent. Therefore, the only effect of items C-5 and F-5, read together, is that these two items exhaust the different types of melting furnaces installed in a glass manufacturing concern. It is not correct to suggest that these two entries exhaust the entire items of machinery installed in a glass manufacturing concern. The words used in these two entries do not point to this conclusion. On the other hand, the entry in item F-4 specifically provides 100 per cent depreciation on "glass cylinder including valves and regulators". If we accept the submissions of the Ld. DR that the entries in items C-5 and F-5 exhaust the machinery installed in a glass manufacturing concern, the result will be that gas cylinders installed in glass manufacturing concern would be entitled to depreciation @ 20 per cent under item-5 and gas cylinders installed in other concerns would be entitled to the special rate of depreciation of 100 per cent. This would be an anomaly. While interpreting the entries of the depreciation schedule, we have to interpret them, in such a manner as to avoid such absurd or anomalous results. The entry in item F-4 should therefore be taken to apply to gas cylinders installed in a manufacturing concern irrespective of the product manufactured. We are also not inclined to accept the view of the CIT, canvassed before us by the Ld. DR that normally gas cylinders are understood to be portable. There is no such requirement in item F-4. The CITs finding that the storage tank installed by the assessee containing gas is a permanent concrete installation is also not correct judging by the photographs supplied by the assessee. The concrete portion is only the columns which support the storage tank. The cylinder itself is not made of concrete. It also appears to us from the photographs that if required the storage tank can be removed. The concrete columns, merely support the storage tank. The fact that the storage tank is very big with the capacity of 30 M.T. does not militate against the assessee's claim that it is a gas cylinder. In the Concise Oxford Dictionary, the word "cylinder" is defined as "uniform solid or hollow body with straight sides and a circular section; a thing of this shape e.g. a container for liquified gas". The requirement of the entry is that it should be of a cylindrical shape and there is no requirement that the cylinder should be small in size or portable.
8. For these reasons, we uphold the contention of the assessee and hold that the LPG gas tank cylinder installed by it during the previous year is eligible for depreciation at 100 per cent of the cost. The order of the CIT is cancelled and the appeal is allowed.
9. In view of the fact that the assessee is eligible for depreciation at 100 per cent, the alternative contention that it should be given extra-shift depreciation and also investment allowance cannot be accepted.
10. ITA No. 3589 is an appeal which arises out of the order passed by the Income-tax Officer giving effect to the order of the Commissioner under Section 263 of the Act. In the said order, the depreciation of Rs. 17,42,716 given in respect of the LPG Gas tank cylinder has been withdrawn as directed by the Commissioner. The appeal against that order was accepted by the CIT(A). The department is an appeal. In view of our decision in ITA No. 1495, the departmental appeal is to be dismissed. We do so.
In the result, the appeal filed by the assessee is allowed and the appeal filed by the department is dismissed.