ITAT allows depreciation on gas cylinders, overturns CIT(A) order for assessment year 1985-86.

The ITAT allowed the assessee's appeal against the CIT(A) order for the assessment year 1985-86. The depreciation disallowance issue regarding gas cylinders was decided in favor of the assessee, as the ITAT found the claim valid based on early acquisition, lease agreement, and formal introduction of assets in the business. The ITAT held that the Department was unjustified in denying depreciation. Additionally, the interest charge issue under section 217(1A) did not stand after allowing depreciation on the cylinders, resulting in the appeal being allowed in favor of the assessee.

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Issues Involved: Appeal against CIT(A) order for asst. yr. 1985-86.

Depreciation Disallowance Issue:
The assessee appealed against disallowance of depreciation on gas cylinders purchased and used in business. The assessee argued that cylinders were acquired in Feb. 1985, with a lease agreement starting from March 15, 1985. The Assessing Officer rejected claim based on irrelevant grounds, including a no objection certificate for cylinder conversion. The Departmental Representative alleged tax planning and doctored evidence. However, the ITAT found the claim valid, noting early acquisition, lease agreement, and formal introduction of assets in the leasing business. Non-delivery of cylinders was due to pending formalities, not lack of use. The ITAT held the Department unjustified in denying depreciation, as the assessee had acquired the cylinders in the previous year and had a valid lease agreement.

Interest Charge Issue:
The next ground of appeal was against interest charged u/s 217(1A) of the Act, which the ITAT ruled did not survive due to allowing depreciation on the cylinders. The appeal was allowed in favor of the assessee.

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