TaxTMI 
TaxTMI 
1997 (12) TMI 150
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....bsp; 6,69,760 JMC/65 19-02-1994 90 3,01,392 JMC/70 26-02-1994 150 5,02,320 JMC/71 26-02-1994 12 40,186 2DA/1993-94 15-12-1993 2 7,415.20 &nbs....
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....the assessee submitted that it is undisputed that the cost of each cylinder purchased by the assessee was below Rs. 5,000. The user of the cylinder during the year under consideration for the purpose of business is also not in dispute. Therefore, as per proviso to section 32(1)(ii), actual cost of the Plant & Machinery should have been allowed as a deduction. He further submitted that third proviso, which provides for restriction of depreciation to 50 per cent in case of user of assets for less than 180 days would not be applicable in respect of 100 per cent depreciation allowable as per first proviso. In support of his contention, he relied upon the commentary by the learned Author, Dr. Avdesh Ojha in his book 'Depreciation under Income-tax and Company Law' at page 124. 5. The learned D.R. on the other hand submitted that the third proviso to section 32(1)(ii) would be squarely applicable and whatever depreciation was permissible, under section 32(1)(ii) or under first proviso thereof, will be restricted to 50 per cent of the normal depreciation, if the asset is used for less than 180 days during the year under consideration. He submitted that if the contention of learned couns....
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....ch percentage which may be prescribed. The first proviso to the above clause provided that in a case where the actual cost of Plant & Machinery is below Rs. 5,000, the actual cost thereof will be allowed as a deduction in the year in which such machinery or plant is first put to use. The third proviso provides that where any asset falling within a block of assets is used, for the purpose of business, for a period of less than 180 days in the previous year, the deduction under this clause in respect of such asset shall be restricted to 50 per cent of the amount calculated at the percentage prescribed under this clause in the case of block of assets comprising such asset. From the plain reading of section 32(1)(ii) and third proviso, it is apparent that the third proviso is applicable in respect of the assets forming part of the block of the assets on which depreciation is allowed at such percentage on WDV as is prescribed. The plant & machinery with actual cost thereof below Rs. 5,000 does not form part of block of asset and depreciation is not allowed on the WDV. But actual cost of such plant & machinery is allowed as a deduction by virtue of first proviso to section 32(1)(ii). ....
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....x Act provided that where the actual cost of any individual item of machinery or plant did not exceed Rs. 5,000 the full cost would be allowed as depreciation in the very first year of user and the written down value of the asset thereafter is taken to be nil This proviso was introduced through the Finance Act, 1966, when the concept of block of assets was not in existence. Thereafter sweeping changes were made in the provisions relating to depreciation. 23.2 Further, it was seen that this provision was being misused by claiming 100 per cent depreciation on a large number of assorted items below Rs. 5,000. This enabled the assessees to reduce their taxable profits by claiming 100 per cent write off in the year of purchase. The Finance Act, 1995, has deleted the first proviso to section 32(1)(ii) and all items of machinery or plant including those costing less than Rs. 5,000 will form part of a block of assets and be allowed depreciation at the specified rate in accordance with rule 5 of the Income-tax Rules" From the above, it is clear that by virtue of omission of first proviso to section 32(1)(ii) all items of plant & machinery costing less than Rs. 5,000 will also form par....