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of <h1>High Court allows input tax credit on consumables for textile production, awaits Supreme Court ruling on asset depreciation</h1> <h3>THE STATE OF KARNATAKA Versus M/s SRI KRISHNA SPINNING AND WEAVING MILLS PVT LTD</h3> THE STATE OF KARNATAKA Versus M/s SRI KRISHNA SPINNING AND WEAVING MILLS PVT LTD - TMI Issues involved:Challenge to order allowing input tax credit on consumables used in Dyeing and Printing of textiles, challenge to granting deduction on depreciation claimed in respect of capital goods.Analysis:Issue 1: Input tax credit on consumablesThe Revenue challenged the order allowing input tax credit on consumables used in Dyeing and Printing of textiles by the assessee. The Tribunal set aside the orders of the authorities below and directed the Assessing Authority to correctly calculate the input tax on consumables. The High Court referred to a previous case and highlighted that if tax is paid on goods used as inputs in manufacturing or processing goods despatched outside the state, the assessee is not entitled to deduction on input tax. However, in the present case, the assessee was engaged in both manufacturing fabrics and job works, with no output tax payable for job works. As the input tax paid for job works could be set off against the output tax payable for manufacturing and sale of fabrics, the claim of the assessee was deemed justified.Issue 2: Deduction on depreciation of capital assetsThe second issue revolved around the disallowance of depreciation of capital assets as a deduction by the Assessing Authority, which was upheld by the First Appellate Authority. Citing a previous judgment, the High Court noted that deductions on depreciation are permissible. The Revenue had appealed this decision to the Apex Court, where leave had been granted. The High Court directed the Assessing Authority to await the judgment of the Supreme Court in the mentioned case to decide whether tax is payable on claimed depreciation. Consequently, the High Court dismissed the appeals.In conclusion, the High Court upheld the order allowing input tax credit on consumables used in Dyeing and Printing of textiles by the assessee, and directed the Assessing Authority to await the Supreme Court's judgment regarding the deduction on depreciation claimed on capital assets.
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