2010 (9) TMI 795 - HC - Income Tax

Whether amount collected by the assessee from the farmers as inspection and registration fee for and on behalf of the Haryana Seeds Certification Agency was not a revenue receipt - assessee received the amount in question on behalf of Haryana Seeds Certificate Agency which was an independent and statutory body of Haryana Government. The amount received was thus not income of the assessee Whether Tribunal was right in law in allowing depreciation and investment allowance on plant and machinery on the ground that the National Seeds Corporation had only rendered services under the contract and the ownership over the plant and machinery with the assessee Held that - Tribunal found the plant and machinery to be owned by the assessee. In such a situation claim of the assessee for depreciation and investment allowance on the plant and machinery could not be rejected. The Tribunal was thus justified in upholding the claim of the assessee for depreciation and investment allowance on the plant and machinery questions referred are answered against the Revenue and in favour of the assessee.

Summary

Issues:
1. Whether the amount collected by the assessee from farmers as inspection and registration fee for Haryana Seeds Certification Agency is a revenue receipt?
2. Whether the assessee is entitled to depreciation and investment allowance on plant and machinery based on ownership?

Analysis:
1. The first issue revolves around the treatment of the amount of Rs.2,08,419/- collected by the assessee from farmers as an inspection and registration fee for the Haryana Seeds Certification Agency. The Assessing Officer considered this amount as the assessee's income, while the assessee claimed it was collected on behalf of the agency and thus not its revenue receipt. The Appellate Authority and Tribunal both sided with the assessee, concluding that the money was collected as an agent and not a revenue receipt of the assessee. The Tribunal found that the issue was previously decided in favor of the assessee for earlier assessment years, further supporting the decision.

2. The second issue concerns the claim of the assessee for depreciation and investment allowance on plant and machinery. The Assessing Officer disallowed the claim citing lack of ownership by the assessee. However, the Appellate Authority reversed this decision, holding that the assessee was indeed the owner of the plant and machinery, thus entitled to depreciation and investment allowance. The Tribunal upheld this finding, emphasizing that the National Seeds Corporation only carried out work under an agreement and returned the plant to the assessee after the contract's conclusion. The Tribunal's decision was based on the details of the contract and ownership status of the plant and machinery.

In conclusion, the High Court answered the referred questions against the Revenue and in favor of the assessee. The judgment clarified that the amount collected by the assessee for the Haryana Seeds Certification Agency was not its income, as it was collected on behalf of the agency. Additionally, the assessee was deemed the owner of the plant and machinery, justifying the allowance of depreciation and investment on the assets. The Tribunal's decisions were upheld based on the established facts and legal interpretations presented during the proceedings.