Research › Browse › Judgment

Kerala High Court · body

1993 DIGILAW 266 (KER)

Dy. Commr. (Law) v. Jinachandran

1993-06-09

K.P.BALANARAYANA MARAR, K.S.RADHAKRISHNAN

body1993
Judgment :- The revenue is the petitioner in this batch of four cases. In T.R.C.Nos.154/91 and 160/91 the respondent is the same person who is an assessee under the Agricultural Income Tax Act. The respondent in T.R.C. 177/82 is a different assessee under the Agricultural Income Tax Act. The first three revisions relate to the years 1975-76,1976-77 and 1977-78 T.R.C. 177/92 relates to the year 1977-78. The order of the Appellate Tribunal relevant for the first three tax revision cases is dated 12-10-1990. The order of the Appellate Tribunal relevant for T.R.C. 177/92 is dated 25-1-1991. A common question arises for consideration in these cases. So we are proposing to dispose of the four revisions by this common judgment. 2. We heard counsel for the revenue senior Government Pleader Shri V.C. James and also counsel for the respondent Mr. Jose Joseph. The only short question that arises for consideration in these case is whether the respondent assessee is entitled to depreciation in respect of sprinkler equipment. Admittedly the sprinkler was being purchased on hire purchase basis. The assessing authority as also the first appellate authority negatived depreciation on the ground that the ownership is not with the assessee and hence depreciation is not admissible. The Agricultural Income Tax Appellate Tribunal in disposing of the appeals stated thus: "Now coming to sprinkler equipment the case of the lower authorities is that the sprinkler being purchased on hire purchase basis, the ownership is not on the appellant and hence depreciation not admissible. We are unable to subscribe to this view of lower authorities. Depreciation is allowable on assets acquired on hire purchase basis. We therefore, order the assessing authority to allow admissible depreciation on sprinkler equipment." Feeling aggrieved by the decision of the Appellate Tribunal holding that the assessee is entitled to depreciation allowance on sprinkler equipment, the revenue has come up in revisions in this batch of four cases. 3. Though more than one question has been framed in each revision it is agreed that the only question that arises for consideration is whether depreciation claimed by the assessee on the sprinkler equipment which was being purchased under hire purchase basis is allowable. 3. Though more than one question has been framed in each revision it is agreed that the only question that arises for consideration is whether depreciation claimed by the assessee on the sprinkler equipment which was being purchased under hire purchase basis is allowable. S.5(1) of the Kerala Agricultural Income Tax Act, 1950 is to the following effect: "(1) In respect of depreciation of buildings, machinery, plant, and furniture which are the property of the assessee and are required for the purpose of deriving the agricultural income, a sum equivalent to such percentage on the written down value thereof as many in any case or class of cases be prescribed and where the buildings have been newly erected or the machinery or plant newly installed a further sum subject to such conditions as may be prescribed. Provided that full particulars have been duly furnished: Provided further that the aggregate of all such allowances made under this Act shall in no case exceed the original cost to the assessee of the buildings, machinery, plant or furniture, as the case may be". The section positively says that it is only in respect of property of the assessee depreciation is permissible. Admittedly the sprinkler machine was being purchased by the assessee on hire purchase basis. The Tribunal has not found that the assessee is the owner of the property during the relevant accounting years for which depreciation is claimed. The tribunal on the other hand, adverted to the fact that the sprinkler is being purchased on hire purchase basis. The description of the Tribunal is suggestive on the fact that the ownership was not with the assessee during the relevant accounting year. On this premise, we are of the view that the Appellate Tribunal was in error in holding that the assessee is entitled to depreciation on sprinkler equipment. 4. But counsel for the respondent assessee referred to us the agreement entered into by the assessee with the Coffee Board. The specimen of the agreement is dated 13th March, 1968. Clauses 1,3(b) and 7 of the said agreement are relevant. It is seen from Clause 3(b) that the last instalment is payable on 30-3-1974. It is further seen from clause 7 of the agreement that if the entire amount due is paid including interest, then and not before, shall the machinery become the property of the hirer(assessee). Clauses 1,3(b) and 7 of the said agreement are relevant. It is seen from Clause 3(b) that the last instalment is payable on 30-3-1974. It is further seen from clause 7 of the agreement that if the entire amount due is paid including interest, then and not before, shall the machinery become the property of the hirer(assessee). As per the agreement which forms part of the paper book the last instalment should have been paid even before the assessment year 1975-76. If that be so, the assessee has become the owner of the machinery and is entitled to the depreciation allowance as per S.5(1) of the Act. But there is no such finding entered by the Appellate Tribunal. So we are of the view that the Appellate Tribunal should peruse the agreement entered into by the assessee and verify whether the last instalment due under hire purchase agreement has been paid before the particular assessment year has begun. If the last instalment has been paid, the assessee becomes the owner of the machinery and from then onwards he will be entitled to the allowance for depreciation etc. The Appellate Tribunal has not cared to go through the terms of the hire purchase agreement or to understand its terms nor has the Appellate Tribunal verified whether the entire instalments due on hire purchase agreement has been paid. These are essential aspects which shall be looked into before entering a finding whether the assessee is entitled to the depreciation allowance under S.5(1) of the Agricultural Income Tax Act. Without a finding on these essential aspects the Appellate Tribunal has arbitrarily held that the assessee is entitled to depreciation allowance. This is improper. We set aside the orders of the Appellate Tribunal dated 12th of October 1990 which are attacked on T.R.C.Nos.154,159 and 160 of 1991 as also the order of the Appellate Tribunal dated 25-2-1991 which attacked in T.R.C. No. 177 of 1992 in so far as the said orders hold that the respondent-assesses is entitled to depreciation allowance in respect of the sprinkler machinery. Only to this extent, we set aside the order of the Appellate Tribunal in these four cases. We direct the Agricultural Income Tax Appellate Tribunal to restore the appeals to file and consider as to whether the respondent assessee is entitled to the depreciation allowance in respect of the sprinkler machinery for the relevant assessment years. Only to this extent, we set aside the order of the Appellate Tribunal in these four cases. We direct the Agricultural Income Tax Appellate Tribunal to restore the appeals to file and consider as to whether the respondent assessee is entitled to the depreciation allowance in respect of the sprinkler machinery for the relevant assessment years. The Appellate Tribunal shall determine the matter within three months from the date of receipt of a copy of this judgment. The tax revision cases are allowed to the above extent.