TaxTMI 
TaxTMI 
2007 (5) TMI 223
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.... this court : "Whether, on the facts and in the circumstances of the case, the hon'ble Tribunal was legally justified in allowing terminal allowance under section 32(1)(iii) of the Income-tax Act ?" 2. The question aforesaid was proposed for reference in the background of the facts that the assessee M/s. Anop Udai Works is a registered firm engaged in manufacture of sarees. During the period relevant to the assessment year 1983-84, the assessee debited an amount of Rs. 1,97,926 towards repairs and maintenance ; and this included a sum of Rs. 1,31,305 which was claimed as terminal allowance by the assessee under section 32(1)(iii) of the Act towards the alleged discarded copper rolls. The Assessing Officer ("the AO") referred to the re....
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....hat the rolls are no longer usable, they are said to be discarded even though, physically they might remain with the assessee, and terminal allowance has to be granted unless evidence was brought on record about they being used. The Tribunal observed that merely because there was no new purchase of rolls, it cannot mean that written off rolls were used because the assessee was having with it the stock of usable rolls. The consideration by the learned Tribunal in its judgment dated July 12, 1995, reads thus : "10. During the year the assessee debited Rs. 1,97,926 as repairs and maintenance. This included Rs. 1,31,305 on account of discarded copper rolls which was claimed as terminal allowance by the assessee under section 32(1)(iii). The ....
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....the Tribunal has erred in not considering the fact that the assessee never discarded the rolls but only revalued them and claimed as a deduction under section 32(1)(iii) and such claim has rightly been disallowed by the Assessing Officer. It has been submitted that the assessee had the stock of rolls whose value according to the books of account was Rs. 2,29,491 ; and that the assessee devalued the entire lot by applying a market rate of Rs. 25 per kg. thereby showing the value of rolls at Rs. 98,197 and claimed the balance amount as deduction by way of terminal allowance. According to the Department, there being no other items of rolls as per the balance-sheet and as per the material on record, the assessee had used only the devalued rolls....
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....uestion reads thus : 9. Having given a thoughtful consideration to the rival submissions and having examined the record, we are not satisfied with the correctness of the decision of the Appellate Tribunal and in the circumstances of the case, we are of the opinion that the Tribunal ought to state the case and refer the same to us on the question as proposed by the Department. 10. A perusal of the order passed by the Assessing Officer makes it clear that in the rolls accounts there had been certain additions in the assessment years 1980-81 and 1981-82; but there has not been any addition in the assessment year 1982-83 and so also in the assessment year 1983-84 (the year under consideration). The opening balance of the rolls account for....
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....at of "discarded copper rolls" and has further observed that merely because no new rolls were purchased does not mean that written off rolls were used because the assessee was having a stock of usable rolls with it. The Tribunal has totally missed the point that there was no other stock of usable rolls but the entire of the rolls valued at Rs. 2,29,491 has been taken up in the said accounting entry ; and after deducting their market value calculated at Rs. 25 per kg., entire of the remaining amount has been claimed towards terminal allowance. The proposition of discarding, as stated by the assessee, and accepted by the Tribunal, appears to be seriously questionable. If the entire of the stock of rolls were accepted to have been discarded, t....
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....ears of service has to be taken by the assessee alone. However, the hon'ble court further observed (page 235) : "Of course, if they come to the conclusion that discarding was a device to evade income-tax, they can disallow the claim of the asses-see on this ground but that can be done only upon the factum of discarding rather than advisability or desirability of discarding of a particular asset, if it otherwise falls under section 32(1)(iii)." 14. In the case at hands, the question of advisability or desirability of so-called discarding is not at all germane to the issue involved. As noticed, the copper rolls were essential parts of machinery for manufacturing process and the Tribunal has proceeded on an incorrect premise as if usable....