Law:

Section:

Circuit breaker, Transformer, Isolater, arrestor, Control panel, Capacitor bank, etc., which are required for control flow and monitoring of energy, form part of auto- matic electrical load monitoring system and would fall under item (a) of Category B of 'Energy saving devices' mentioned in rule 5, Appendix-I, Part III(3)(iii)B of Income-tax Rules, 1962 and, thus, are eligible to 100 per cent depreciation allowance Section 32 of the Income-tax Act, 1961, read with rule 5, Appendix I, Part III(3)(iii)B of the Income-tax Rules, 1962 - Depreciation - Allowance/rate of - Assessment year 1996-97 - Assesee entered into a purchase-cum-lease agreement with Orissa State Electricity Board (OSEB), an undertaking of State Government of Orissa for generation, distribution and supply of electricity - By said agreement, assessee purchased electrical machinery of some sub-stations of OSEB for a price of Rs. 25 crores and leased out said machinery back to OSEB for a lease rent for a period of 60 months - Assessee claimed depreciation on said machinery at rate of 100 per cent on ground that said machinery was energy saving devices - Items of machinery in sub-stations purchased by assessee from OSEB were instruments for controlling and monitoring energy flows and comprised of Circuit breaker, Transformer, Isolater, Arrestor, Control panel, Capacitor bank, etc., which were required for control flow and monitoring of energy - Whether machinery purchased by assessee from OSEB formed part of automatic electrical load monitoring system and would fall under item (a) of category B of 'energy saving devices' mentioned in rule 5, Appendix-I, Part III(3)(iii)B - Held, yes - Whether, therefore, depreciation on said machinery was allowable at rate of 100 per cent - Held, yes Section 4 of the Income-tax Act, 1961 - Tax planning - Whether, if a transaction is otherwise valid in law and results in reduction of tax to an assessee, same cannot be brushed aside on ground that underlying motive of entering into transaction by assessee was to reduce its tax liability to State - Held, yes - Whether, in view of facts stated under heading 'Depreciation allowance/rate of' and, in absence of any material…

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