Corrosive chemicals and interest liability in tax appeals: scope of depreciation entry and appealability of interest charge clarified.

The depreciation entry for "corrosive chemicals" was construed by reference to corrosive effect rather than a narrow distinction between free and non-free chemicals, so the assessee's wider interpretation failed and the Revenue succeeded on that point. On interest under section 139(8), the article states that liability to interest forms part of the assessment process and can be challenged in appeal where the objection is to the existence of liability itself, but a request confined to waiver or reduction is not appealable. The legal position therefore distinguishes between disputing chargeability and seeking discretionary relief.

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Issues: (i) Whether the words "corrosive chemicals" in the relevant depreciation entry included only free chemicals or also non-free chemicals having corrosive effect; and (ii) whether the assessee could challenge the chargeability of interest under section 139(8) of the Income-tax Act, 1961 in its quantum appeal.

Issue (i): Whether the words "corrosive chemicals" in the relevant depreciation entry included only free chemicals or also non-free chemicals having corrosive effect.

Analysis: The expression in the depreciation appendix was construed in the light of the earlier decision on the same assessee, which had already considered the scope of the entry. The phrase was treated as covering corrosive chemicals by reference to their corrosive effect and not by confining it to free chemicals alone.

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Issue (ii): Whether the assessee could challenge the chargeability of interest under section 139(8) of the Income-tax Act, 1961 in its quantum appeal.

Analysis: Levy of interest was treated as part of the assessment process. It was held that an assessee can dispute the levy of interest in appeal where the objection is to liability itself, though a claim confined to waiver or reduction of interest does not fall within appeal under clause (c) of section 246.

Conclusion: The issue was answered in favour of the assessee to the extent that liability to interest could be questioned in appeal, but not a mere request for waiver or reduction.

Final Conclusion: The first question was decided for the Revenue, while the second question was answered by applying the Supreme Court's ruling on the limited appealability of interest under section 139(8), and the reference stood disposed of accordingly.

Ratio Decidendi: An assessee may challenge in appeal the liability to interest as part of the assessment process, but an appeal does not lie merely for waiver or reduction of such interest.

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