Higher depreciation for beer-manufacturing machinery depends on corrosive chemical contact during the production process.

Machinery used in beer manufacture may qualify for higher depreciation where the processing involves chemical changes and corrosive substances come into contact with the plant. On spot inspection and evidence about the stages of manufacture, raw materials, acidity levels and the effect of brine, carbon dioxide and other substances, it was found that most machinery was exposed to corrosive chemicals during production. The note distinguishes contrary High Court authority on materially different facts and records that the higher rate applied to all machinery except specific items not shown to have such contact.

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Issues: Whether the machineries used in the manufacture of beer came into contact with corrosive chemicals so as to qualify for a higher rate of depreciation, and whether the assessee was entitled to such benefit in respect of all the machineries except those specifically excluded.

Analysis: The machinery was inspected on the spot and evidence was recorded regarding the stages of beer manufacture, the nature of the raw material, the chemicals added during processing, the acidity of the liquid at different stages, and the corrosive effect of brine, carbon dioxide and other substances on the plant and machinery. On that basis, it was found that the raw material underwent chemical changes and that corrosive chemicals came into contact with most of the machinery during manufacture. The Tribunal distinguished the Punjab and Haryana High Court decision relied on by the Revenue on the ground that the facts were materially different.

Conclusion: The assessee was held entitled to higher depreciation at 15% on all machineries except the specified items which did not come into contact with corrosive chemicals.

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