Law: Income Tax Act, 1961

Section: 28,32

Income-tax----Business---Depreciation---New business or part of existing business--¬Tests---Finding by Tribunal that contract work did not constitute new business---Tribunal justified in granting depreciation for twenty-three months---Indian Income Tax Act, 1961, Ss.28 & 32. The assessee-firm was engaged in the execution of various contract works. During the year under consideration, the firm was awarded a new contract known as "reclamation and screening of iron ore at Aridongari" by Bhilai Steel Plant by order, dated January 20, 1988. For execution of this contract, the assessee purchased poclain machinery. The Assessing Officer allowed depreciation can poclain machine for a period of 14 months as against 23 months claimed, by the assessee. However, the Tribunal granted depreciation on poclain machinery for a period of 23 months. On a reference: Held, that, the Tribunal had rightly held that what has to be seen is the head of income and commonality of the purpose. The Tribunal took the view that the common fund was utilised and it was in the common pool, finances were made available to the poclain business started at different dates. The Tribunal was justified in holding that the contract awarded by Bhilai Steel Plant was not a new source of income within the meaning of the second proviso to. subsection (2) of section 3 of the Income Tax Act, 1961. The assessee was entitled to depreciation on the poclain machinery for a period of twenty-three months. Bansidhar Private Ltd. v. CIT (1981) 127 ITR 65 (Guj.) applied. JUDGMENT This is an income-tax reference under section 256(1) of the Income Tax Act, 1961, at the instance of the Revenue and the following two questions of law have been referred by the Tribunal for answer by this Court: (i) Whether, on the (acts and in the circumstances of the case, the Tribunal was justified in holding that the contract awarded by Bhilai Steel Plant was not a new source of income within the meaning of the second proviso to subsection (2) of section 3 of the Income Tax Act, 1961? (ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in directing to allow…

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