TaxTMI 
TaxTMI 
2003 (1) TMI 65
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....he matter to the Income-tax Officer to work out relief under section 80J of the Income-tax Act, 1961 ?" The Tribunal has also referred the following two questions, which are the subject matter of Income-tax Reference No. 120 of 1989, under section 256(2) of the Income-tax Act, 1961 : "(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in withdrawing rehabilitation allowance of Rs. 1,73,886 granted by the Commissioner of Income-tax (Appeals) under section 33B of the properties which were extensively damaged ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in remanding the matter to the Income-tax Officer to work out relief under section 80J of the Income-tax Act, 1961 ?" The Tribunal has given elaborate statement of facts in Income-tax Reference No. 120 of 1989 and, therefore, a detailed statement was not forwarded in Income-tax Reference No. 51 of 1989 since the facts and issues involved were identical with the only distinguishing feature in Income-tax Reference No. 51 of 1989 that the assessee in that case had not claimed anything on account ....
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....hich was written off being Rs. 62,300, 60 per cent. thereof, i.e., Rs. 37,380, was allowed as rehabilitation allowance. In the other case where the assessee claimed rehabilitation allowance in respect of damaged assets only the value of the assets was shown as Rs. 74,754 which was reduced to Rs. 44,850 on which deduction under section 33B was allowed at the rate of 60 per cent., i.e., Rs. 26,910. Thus, the Income-tax Officer was directed to allow a deduction of Rs. 2,11,266 to the assessee of Reference No. 120 of 1989 and Rs. 26,910 to the other assessee under separate orders as rehabilitation allowance under section 33B of the Act. The Tribunal, in the appeal by the Revenue, held in both the cases that the assessee was entitled to deduction under section 33B since the conditions therefor were duly satisfied. The Tribunal observed, "entire operations of the assessee were affected by the floods" that took place on August 11, 1979, during the previous year which was from July 1, 1979, to June 30, 1980. The Tribunal, while upholding the order of the Commissioner of Income-tax (Appeals) only to the extent of allowing the claim in respect of the terminal allowance under section 32....
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.... the other assets was not allowable under section 32(1)(iii) and no deduction could be claimed under section 33B in respect thereof. He strongly contended that since section 32(1)(iii) did not refer to the assets which were damaged, it was not applicable for the purpose of working out any rehabilitation allowance under section 33B, because, section 32(1)(iii) envisaged that the assets should be written off. Since the damaged assets were not written off, no amount by way of deduction would be allowable in respect of such assets under section 32(1)(iii) and since the depreciation amount was not allowable by way of deduction in respect of damaged assets under section 32(1)(iii), it would, a fortiori, not be allowable even under section 33B for the damaged assets. Learned counsel, who argued for the Revenue in Income-tax Reference No. 51 of 1989, contended that rehabilitation allowance under section 33B was available only in the situations which were enumerated under that provision, and that the provision itself states that the allowance should be 60 per cent. of what was allowable under section 32(1)(iii) of the Act. It is submitted that it was, therefore, necessary to work out wha....
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....ort of the written down value thereof : Provided that such deficiency is actually written off in the books of the assessee : Explanation.-For the purposes of this clause, - (1) 'moneys payable' in respect of any building, machinery, plant or furniture includes - (a) any insurance, salvage or compensation moneys payable in respect thereof ; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold ; . . ." Section 32(1)(iii) is in respect of depreciation of building, machinery, plant or furniture owned by the assessee for the purpose of business or profession, and it provided subject to section 34, inter alia, for deduction in the case of any building, machinery, plant or furnitures "sold, discarded, demolished or destroyed" in the previous year other than in which it was first brought into use. The deduction provided therein is of the amount by which the 'moneys payable" in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value. The expression "moneys payable" under this clause includes any insurance, salvage or compensation moneys payable....
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....2(1)(iii) is made in section 33B for the purpose of fixing the parameters for working out the rehabilitation allowance on the basis of the amount that would be allowable under section 32(1)(iii), both in respect of "extensive damage" and "destruction to the asset". Therefore, in case where the extensive damage to the asset is caused and it falls under section 33B, the amount of deduction will have to be worked out on the basis of the same formula, as is provided for the assets destroyed, namely, of minusing the "moneys payable" (as explained in Explanation to clause (iii) of section 32(1)) and scrap value, if any, from the written down value of the damaged asset. On the amount so worked out, rehabilitation allowance under section 33B at 60 per cent. thereof will be allowable. It is obvious that the rehabilitation allowance under section 33B is independent of other allowances permissible under the other provisions. We may note here that the relief under section 33B came to be withdrawn by section 5 of the Finance Act of 1984 and the explanatory note in that regard, which is reproduced here, makes interesting reading : " 9.2 Having regard to the fact that most of the industrial....
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....der that the estimate of written down value of the assessee was on the higher side and in his opinion, 60 per cent. of such written down value would be the reasonable amount. There was, in our opinion, no scope for forming such opinion without reference to the parameters laid down under section 32(1)(iii) which required the expression "moneys payable" to be considered in light of the Explanation thereunder, necessitating to take into account the fact as to what amount of insurance, salvage or compensation, if any, was received for the damage. The finding as regards the amount that would be allowable under the provisions of section 32(1)(iii) was required to be based on objective criteria prescribed under that provision rather than by formation of a subjective opinion of the reasonableness of the amount. Therefore, by mechanically restoring the order of the Commissioner of Income-tax (Appeals), we cannot endorse the view which runs counter to our view on the provisions of law as expressed hereinabove. In the above view of the matter, we answer question No. 1, in Income-tax Reference No. 120 of 1989, as follows : The Tribunal was not right in withdrawing the entire rehabilitati....