1980 (4) TMI 72 - HC - Income Tax

Gas cylinders classified as 'plant' under Income Tax Act, qualifying for depreciation allowance.

Commissioner Of Income-Tax, Delhi I Versus National Air Products Limited

Commissioner Of Income-Tax, Delhi I Versus National Air Products Limited - [1980] 126 ITR 196, 18 CTR 300, 4 TAXMANN 309 Issues involved: The issues involved in the judgment are the claim of depreciation on gas cylinders used for storing oxygen gas by a private limited company, the interpretation of the term 'plant' under the Income Tax Act, 1961, and the eligibility of gas cylinders for depreciation allowance.Depreciation Claim on Gas Cylinders:During the assessment year 1965-66, a private limited company claimed depreciation on cylinders used for storing oxygen gas. The Income Tax Officer (ITO) rejected the claim stating that the cylinders were not used but merely purchased and stored. The Appellate Assistant Commissioner (AAC) also denied depreciation, considering the cylinders as containers returnable by customers. However, the Income-tax Appellate Tribunal held that the gas cylinders constituted 'plant' under the Income Tax Act, 1961, and allowed depreciation on them for the relevant years.Interpretation of the Term 'Plant':The Tribunal relied on the definition of 'plant' in the Income Tax Act, 1961, which includes various items like ships, vehicles, books, and scientific apparatus. Referring to past decisions, the Tribunal concluded that gas cylinders fell within the scope of 'plant' as they were used in the business operations of the company. The High Court endorsed this view, emphasizing that the term 'plant' has a broad meaning and includes any object used in carrying on a business, not limited to mechanical or industrial operations.Eligibility of Gas Cylinders for Depreciation:The High Court considered the primary meaning of 'plant' and observed that gas cylinders, being essential for the business operations of the company, qualified as plant assets. The Court highlighted that the Schedule to the Income Tax Rules allows for depreciation on gas cylinders at 100%, indicating their recognition as plant assets. The Court affirmed the Tribunal's decision to allow depreciation on the gas cylinders and ruled in favor of the assessee, directing the Commissioner to pay the costs of the respondent in one of the cases.This judgment clarifies the eligibility of gas cylinders for depreciation under the Income Tax Act, emphasizing the broad interpretation of the term 'plant' and the importance of considering the function of assets in business operations when determining depreciation allowances.