Court grants 100% depreciation on shuttering units as machinery.

The High Court ruled in favor of the assessee, upholding the Tribunal's decision to allow 100% depreciation on each shuttering unit as machinery or plant under the Income Tax Act. The Court considered shuttering essential for construction work, treating each unit as an independent component eligible for full depreciation. This decision aligned with previous rulings recognizing shuttering as plant and allowing depreciation. The Court rejected the Department's argument and affirmed that each shuttering unit qualifies for 100% depreciation, settling the matter in favor of the assessee.

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Issues:

1. Interpretation of the proviso to section 32(1)(ii) regarding depreciation on shuttering as machinery or plant.

Analysis:

The case involved a question regarding the interpretation of the proviso to section 32(1)(ii) of the Income Tax Act concerning the allowance of depreciation on shuttering as machinery or plant. The assessee, engaged in construction work, acquired shuttering work worth Rs. 2,21,430 and claimed 100% depreciation on each unit of shuttering as the cost of each unit was less than Rs. 5,000. The Assessing Officer, however, allowed only a depreciation of 331/3 per cent on the integrated unit of plant and machinery. The Tribunal upheld the assessee's claim for 100% depreciation on each shuttering unit, considering it as a necessary component for construction work without which the work cannot be executed.

The Tribunal's decision was challenged, citing the decision of the Allahabad High Court where shuttering was treated as plant, and depreciation was allowed. The High Court agreed with this view, emphasizing that shuttering is essential for construction work and is considered a plant. Each shuttering unit was deemed an independent unit costing less than Rs. 5,000, making it eligible for 100% depreciation as per the rules. The Court found no reason to interfere with the Tribunal's decision and ruled in favor of the assessee, holding that each shuttering unit qualifies for 100% depreciation under the specified provisions.

Therefore, the High Court answered the question in the affirmative, favoring the assessee and rejecting the Department's contention. The reference was disposed of accordingly, upholding the Tribunal's decision to allow 100% depreciation on each shuttering unit as machinery or plant for the purpose of taxation.

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