9911796707
TMI Blog1992 (11) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... ld chicks called parent birds and rear them till they attain the egg laying stage. The eggs laid by parent birds would not be sold but would be hatched into one day old chicks which will be sold as stock-in-trade. One day old chicks would also be purchased to convert them into parent birds and one day old chicks would also be sold as stock-in-trade. However, the assessee maintains separate accounts for these two categories - (i) one day old chicks called parent birds, and (ii) one day old chicks meant to be stock-in-trade. The company has been consistently contending that the parent birds used for the purpose of laying eggs to be hatched in the hatcheries of the assessee are to be considered as plants and it has been claiming depreciation, terminal allowance and investment allowance in respect of the cost of the birds. In the statement of fixed assets prepared for assessment year 1987-88 W.D.V. of the livestock (parent birds) as on 1-4-1986 was shown at Rs. 12,84,727. The additions made in the accounting year in question to the said live stock was noted as Rs. 38,32,555 and the total of the W.D.V. of the live stock was noted as Rs. 51,17,282. On that depreciation of Rs. 27,91,696 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut cannot be considered as plants. At para 9 in the learned Commissioner (Appeals)'s order, the ground of attack relating to rejection of the claim of investment allowance made by the assessee can be found and they are the following: "The learned Deputy Commissioner is not correct in his observation that the one-day old chicks purchased by the Company for laying eggs used for hatching, constitute stock-in-trade. This observation of the Deputy Commissioner is without any basis and in fact is in confrontation to the earlier record. The learned Deputy Commissioner is not justified in ignoring the order of the Income-tax Appellate Tribunal relating to the earlier years wherein it was clearly held that the parent stock purchased by the Company constitute plant and therefore, the additions to parent stock is eligible for investment allowance." At para 10, the learned Commissioner (Appeals) pointed out that the assessee claimed investment allowance on parent stock-in-trade at Rs. 38,32,555 and the Dy. Commissioner (Assessment) disallowed the claim holding that the parent stock is not plant. He found that this point is covered by the decision of the Tribunal for assessment year 1981-82 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; -------------- Total Rs. 44,57,467 Less: Below 20 weeks birds 4,84,145 Birds died ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und on which he withdrew depreciation and terminal allowance granted by him earlier was noted in his order under section 154 dated 19-3-1991 which is hereinafter called the second modificatory order. In the second modificatory order, the Deputy Commissioner held the following: "In the assessment completed on 27-3-1990 in the above case for the assessment year 1987-88, the assessee's claim for depreciation of Rs. 27,91,696 on live stock was disallowed, treating the same as stock-in-trade. The assessee has not contested this disallowance in appeal before the CIT(A) and consequently, the order of the CIT(A) in I.T.A. No. 15/DC(A) III/CIT (A)III/90-91 dated 9-7-1990 is silent on this issue. However, while passing the modification order on 10-9-1990 giving effect to the said appellate order, a total sum of Rs. 25,73,475 was wrongly allowed as a deduction from the total income towards depreciation and terminal allowance on live-stock by oversight, without the CIT (A) having directed to allow any such relief in the appellate order." He revised the total income by his second modificatory order and arrived at the total income of the assessee for assessment year 1987-88 at Rs. 21,49,050. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the depreciation claimed should be deemed to have been allowed to the assessee by the first modificatory order invoking suo motu powers of the Income-tax Officer given under sub-section (2) of section 154. He relied upon the following decisions: (i) Chokshi Metal Refinery v. CIT [1977] 107 ITR 63 (Guj.). (ii) Beco Engg. Co. Ltd. v. CIT [1984] 148 ITR 478 (Punj. & Har.). 5. On the other hand, the learned Departmental Representative argued that though the Dy. Commissioner while passing the original assessment order specifically disallowed the claim of depreciation made by the assessee, the assessee did not question the rejection of the claim of depreciation before the Commissioner (Appeals). The first modificatory order dated 10-9-1990 is one passed under section 250 of the Income-tax Act, in order to give effect to the order of the Commissioner (Appeals). It is significant to note that the assessee did not file specific application seeking rectification under section 154 asking for relief of depreciation as well as terminal allowance before the Income-tax Officer. Rectificatory order was not passed specifically under section 154. He argued that there is a vast difference betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered and decided by the appellate authority can as well be rectified under section 154(1) by the Income-tax Officer. In this case grant of depreciation and terminal allowance which were rejected by the Income-tax Officer in the first instance were not at all appealed against before the Commissioner (Appeals) and, therefore, they still remain as orders of the Deputy Commissioner which are amenable for rectification under section 154(1) by the Deputy Commissioner provided his previous orders were beset with mistakes of facts or law. The Income-tax Appellate Tribunal in its order dated 17-9-1983 in this very assessee's case for assessment years 1978-79, 1979-80 and 1980-81 considered whether the assessee is entitled to depreciation allowance or not and held the following: "We have considered the rival submissions. The order of the Tribunal refers to the method of accounting which can be employed in poultry business and which has been referred to by the Research Committee of the Institute of Chartered Accountants of India in a monograph issued in 1980. Debiting of a depreciation i.e. depletion allowance would be permissible. It was submitted that in the present case, once the util ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the petitioner on the relevant valuation date within the meaning of section 2(m) of the W.T. Act, 1957. The petitioner did not prefer appeals against the order of assessment. Subsequently, however, the petitioner came to know from a decision of the Income-tax Appellate Tribunal that the amounts claimed by it in respect of provision for taxation were deductible in computing the net wealth of the petitioner. The petitioner made applications under section 35 of the Wealth-tax Act to the Wealth-tax Officer on the ground that it was an error apparent on the face of the records. Applications were rejected and they were confirmed by the Commissioner. The petitioner filed writ petition in the High Court to quash the orders refusing to rectify the assessment orders and for a direction to rectify the assessment orders. The Gujarat High Court held that as decided in CWT v. Raipur Mfg. Co. Ltd. [1964] 52 ITR 482 by the same High Court and in Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 by the Supreme Court it has to be held that provision for taxation was a debt owed within the meaning of section 2(m) of the Act and, therefore. it was deductible in computing the net we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Officer by his order under section 154 holding that since the assessee had created development rebate reserve of Rs. 7,172 only, the maximum development rebate that may be allowed was Rs. 9,563. Therefore, the Income-tax Officer restricted the Development Rebate to be allowed to Rs. 9,550 in respect of machinery only. The Appellate Asstt. Commissioner as well as the Tribunal held the order of rectification as not valid. The High Court on a reference held that part of the order of the Income-tax Officer allowing development rebate of Rs. 11,011 was not the subject-matter of appeal before the Appellate Asstt. Commissioner and was, therefore, left untouched by his order. The Income-tax Officer was, therefore, held competent to rectify that part of his order. The facts of the Karnataka High Court's order appears to be very near to or similar to the facts of this case. The Karnataka High Court while disposing of the above case had the occasion to consider the scope of sections 154, 154(1A) as well as the doctrine of merger. It held the following as regards the three topics mentioned in part of the head-note at pages 454 and 455: "In order to attract the provisions of section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It can be seen that from the earlier orders of the Tribunal in this very assessee's case. it was held that the assessee is entitled to depletion allowance and, therefore, there was clear mistake apparent on the face of the record. 8. Another decision to which we may refer is the decision of the Delhi High Court in Rohtak & Hissar Districts Electric Supply Co. (P.) Ltd. v. CIT [1981] 128 ITR 52. In that case, the depreciation and development rebate were granted by the Income-tax Officer for assessment year 1962-63. This was done on the basis of written down value under section 10(5) of the Indian Income-tax Act, 1922. However, an appeal had been taken to the Appellate Assistant Commissioner against the assessment order and in the memorandum of grounds of appeal, a ground relating to the determination of depreciation and development rebate was received, raised. However, the Appellate Assistant Commissioner who passed the appellate order did not give any decision on the correctness or otherwise of depreciation and development rebate allowed on service lines. The Income-tax Officer rectified his assessment order under section 154 holding that he had wrongly allowed depreciation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, in this case it was not stated by the assessee that depreciation was not intended to be claimed. Further the assessee not only made depreciation claim but also gave all particulars necessary to determine his claim. For instance he filed balance-sheet as well as list of fixed assets held by the company as on the last day of the previous year. The amount of W.D.V. on the 1st day of the year, the addition made during the year, depreciation claimed or W.D.V. at the end of the year all were clearly mentioned in that statement which was one of the annexures to the income-tax return filed by the assessee. Thus full particulars necessary for granting depreciation were already on record. Thus the case on hand is quite different on facts from the Bombay High Court's decision cited by the learned Departmental Representative. Other decision also do not apply and they are clearly distinguishable and as such they need not be specifically dealt with here.
10. In the result, the impugned orders of the Commissioner of Income-tax (Appeals) as well as the second modificatory order are set aside and the first modificatory order is restored. The appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X
|
