Tribunal allows depreciation for barges in barge hiring business

The tribunal allowed depreciation for certain barges acquired by the company, considering barge hiring as a valid business activity. It affirmed the availability of depreciation even if barge hiring was classified under 'Income from Other Sources.' Additionally, the tribunal determined that non-self-propelled barges could be considered as ships for investment allowance purposes, rejecting the revenue's argument. Consequently, the assessee was granted investment allowance under section 32A for the barges, leading to the dismissal of the revenue's appeal and the allowance of the assessee's appeal for the assessment year 1982-83.

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Issues:
- Assessment of depreciation and investment allowance for certain barges acquired by the company.
- Disallowance of investment allowance under section 32A for the assessment year 1982-83.

Analysis:
1. The dispute revolved around the assessment of depreciation and investment allowance for certain barges acquired by the company during the relevant accounting year. The Income-tax Officer initially rejected both claims, but the Commissioner of Income-tax (Appeals) allowed depreciation under section 32 while sustaining the disallowance for investment allowance under section 32A. This led to cross-appeals by the revenue and the assessee.

2. Regarding depreciation, the Income Tax Officer rejected the claim on the grounds that barge hiring was not a business activity of the assessee. However, the Articles of Association of the company revealed that barge hiring was indeed one of the business activities authorized by the company. The company had given these barges on hire and earned income, making depreciation available under section 32.

3. Even if barge hiring was not considered a business activity, the income from it could still be classified under 'Income from Other Sources,' allowing for a claim for depreciation. The tribunal affirmed the order of the Commissioner of Income-tax (Appeals) in this regard, emphasizing the availability of depreciation for the company's barges.

4. The disallowance of investment allowance was based on the argument that barges were not classified as ships since they were not self-propelled by mechanical force and were towed by tugboats. However, a precedent from the Gujarat High Court established that the term 'ship' could encompass non-self-propelled vessels like pontoons, based on the dictionary meaning of the term.

5. The tribunal reasoned that a barge, though not self-propelled, could still be considered a ship or vessel for the purpose of investment allowance. The source of power for movement was not a decisive factor in classifying a vessel as a ship, as historical sailing vessels were propelled by external forces like wind.

6. The revenue's argument that the assessee must have been engaged in the business of operating ships before claiming investment allowance was rejected by the tribunal. The requirement was that the ship, aircraft, machinery, or plant owned by the assessee should have been used for the business carried on by the assessee to be eligible for relief under section 32A.

7. Consequently, the tribunal held that the assessee was entitled to investment allowance under section 32A for the barges, overturning the previous disallowance by the lower authorities. As a result, the revenue's appeal was dismissed, and the assessee's appeal was allowed, resolving the issues in favor of the assessee for the assessment year 1982-83.

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