Law: Income Tax Act, 1922

Section: 8(2)

Law: Income Tax Act, 1922

Section: 8(2)

Income-tax Rules, 1922, r. 8(2)-Depreciation allowance Re-adjustment made by partners of registered firm to carry on thenceforward business as limited company-Machinery also absorbed in share capital of new company-Machinery thus standing transferred could not be second hand and depreciation allowance already allowed in respect of such machinery could not be disallowed on ground that old machinery was transferred to the Company. Veerappa Transports C .I. T., Madras (1963) 50 I T R 442 and C. I. T. v. Bufco Tanneries Ltd. P L D 1966 Lah. 244 ref. THIS ORDER PASSED BY: WAHEEDUDDIN AHMAD, JUSTICE:------------------ The respondent which was a registered firm up to the assessment year 1960-61, was incorporated as a private limited company on the 23rd September 1959 and commenced business from the 1st October 1959 during the assessment year 1961-62. The firm had installed certain new machinery on which additional depreciation allowance under rule 8(2) of the Income-tax Rules was allowed until it was incorporated into a private limited company. During the assessment year 1961-62, when the respondent-company came to be assessed for the first time, the Income-tax Officer did not allow depreciation allowance on the old machinery transferred. The respondent challenged this order in appeal before the appellate Assistant Commissioner of Income-tax, who allowed the appeal and gave additional depreciation at the rate of 7 % which the Income-tax Officer has not allowed. The matter was then taken before the Income-tax Appellate Tribunal. This appeal was dismissed on the 27th August 1965, relying on the decision of the Madras High Court in the case of Veerappa Transports v. C. 1. T., Madras ((1963) 50 I T R 442). The petitioner moved an application under section 66(1) of the Income-tax Act for reference of the following question to the High Court :- "Whether on the facts and in the circumstances of the case, the Tribunal was justified in allowing additional depreciation on machinery originally purchased by the Reg1stered firm and used for about two years and then taken over by the limited company?" The Tribunal, relying on the decision of the West Pakistan High Court in the case…

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