Law: Income Tax Act, 1961

Section: 32

ORDER 1. This appeal relates to the assessment year 1986-87. The issue pertains to depreciation on the 1250 gas cylinders which the assessee had claimed in that year, and which has been disallowed by the authorities below. The brief facts which require mention for the purpose of the present appeal are as under: The appellant-assessee had set up its unit some time in September, 1985 to carry on the business of manufacturing and Compressing Oxygen, Hydrogen, Nitrogen Amonis, Carbonic Acid, Action (including dissolved) Argon, cooking gas and other types of industrial gases or kind substances etc. For running the aforesaid plant, the assessee had also bought 1250 gas cylinders. However, since the unit had not started functioning, these gas cylinders were leased out to M/s Saraveshwari Gases (P) Limited, Ghaziabad and M/s Malik Industries. Signature Not Verified In the return Digitally signed by filed by the assessee, he claimed depreciation on those gas Parveen Kumar Chawla Date: 2015.03.26 16:57:38 IST Reason:cylinders at the rate of 100 per cent, as provided under the rules on the aforesaid item. 2. The Assessing Officer, however, rejected the claim of depreciation on the ground that hiring business was not proved. It would be significant to state that the appeal filed by the assessee before the Commissioner of Income Tax (Appeals) was accepted on the ground that the income received from leasing the aforesaid equipments would be treated as business income and on that basis he allowed the depreciation. Relevant portion of the order of the CIT(Appeals) reads as under: "22. As per the facts, there is no doubt that the assessee purchased the cylinders during the year under consideration and thus he became the owner of these cylinders. Since the Oxygen plant could not be put up during the year under consideration, the assessee was free to use the cylinders for any other purpose to his benefits. He did so by leasing out the cylinders to the two parties. There is no doubt that the cylinders was despatched to the two parties on 20.9.1985. Leasing out of cylinders, in this case amounted to the business of the assessee and once the cylinders had been despatched to the…

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