TMI Blog2005 (12) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be applicable since such assets are covered specifically under the first proviso to the said section and the entire actual cost has to be allowed as a deduction, subject to the assessee fulfilling all other requisite conditions - The question is accordingly answered in the affirmative, i.e., in favour of the assessee - - - - - Dated:- 7-12-2005 - Judge(s) : D. A. MEHTA., MS. H. N. DEVANI. JUDGMENT The judgment of the court was delivered by D. A. MEHTA J.-At the time of admission on April 16, 2003, the following question had been formulated by this court. "Whether the Appellate Tribunal was right in law and on facts in holding that the third proviso to section 32(1) of the Income-tax Act, 1961, would not be applicable in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned order of the Tribunal, considering the undisputed facts available on record. Therefore, in the absence of any substantial question of law, the appeal is dismissed. Dated: October 4, 2005 Heard Mr. M. R. Bhatt for the appellant. After the aforesaid order was made, but before it could be signed it has been brought to the notice of the court that similar issue had come up before this court in the case of CIT v. Dhall Enterprises and Engineers Private Limited, Tax Appeal No. 102 of 2003, and by order dated April 16, 2003 the appeal has been admitted. In the light of the aforesaid position, Tax Appeal No. 102 of 2003 to be listed for final hearing on October 19, 2005 along with this tax appeal." Hence, this tax appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment to apply the third proviso. He therefore, urged that the question referred to the court has to be answered in favour of the Revenue considering the scheme of the Act which unfolded on reading the provisions of section 32(1), the first proviso and the third proviso together. As against that, Mr. R. K. Patel, learned advocate appearing on behalf of the respondent-assessee, submitted that the asset in question did not have any written down value, and therefore, there was no question of considering the assets to be forming part of block of assets. That only in such circumstances, the third proviso would get invoked and hence there was no error committed by the Tribunal. He also invited attention to the amendment made by the Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1966 and the value of the actual cost of machinery or plant was fixed at Rs. 750 (rupees seven hundred fifty only) at that point of time. Subsequently, by the Finance Act, 1983, the said ceiling has been increased to Rs. 5,000 (rupees five thousand only). On July 21, 1966, the Central Board of Direct Taxes, issued the Departmental Circular No. 4-P (LXXVI-61) of 1966 and paragraph 54 of the said circular reads as under: "In order to simplify the calculation and accounting of depreciation allowance in respect of machinery or plant of a small cost, the Finance Act, 1966, has added a proviso (now the first proviso) to section 32(1)(ii) of the Income-tax Act to the effect that where the actual cost of machinery or plant does not exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of that year by an amount which bears no relationship to the user of that asset for earning the profits of that year. Section 32 has, therefore, been amended to provide that, where in a previous year an asset is acquired and put to use for the purposes of business or profession for less than 180 days, depreciation thereon shall be allowed at 50 per cent. of the depreciation allowable according to the percentage prescribed in respect of the block of assets comprising such asset. Furthermore, no depreciation will be allowed in respect of any plant or machinery the cost of which gets amortised in one or more years, under section 42 of the Income-tax Act relating to the special provision for deduction in respect of business of prospecting fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y used as a legislative tool to carve out an exception from the main provision which precedes the proviso. The first proviso makes it clear that in the case of the machinery or plant whose actual cost does not exceed the specific monetary ceiling, such asset would not enter the block of assets and hence, there would be no occasion to work out such percentage of the written down value/actual cost. If the view canvassed by the Revenue is accepted, this would go against the legislative intent. There is one more reason. The third proviso itself requires to restrict the depreciation allowance at 50 per cent. of the amount calculated at the percentage prescribed under clause (ii) of section (1) of section 32 of the Act. As already noticed, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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