Commissioner of Income Tax vs NATIONAL BORING CO.

By the court

This is a reference application u/s 256(2) at the instance of the revenue, seeking reference of the following question for the opinion of this court.

"Whether, on the facts and in the circumstances of the case and considering the fact that in the case quoted by the Tribunal, i.e., Commissioner of Income Tax Vs. Popular Borewell Service and others, the Madras High Court had held that depreciation of 30 per cent was not allowable on rig and compressor used in drilling borewell, the Tribunal was justified in holding that depreciation at the rate of 30 per cent was allowable on rig and compressor used in drilling borewells ?"

The respondent- assessee claimed depreciation at the rate of 30 per cent on the rig and compressor machines which was granted by the assessing officer. However, later on assessing officer rectified the order and reduced the depreciation benefit to 15 per cent only. The Commissioner (Appeals) allowed the claim of the assessee and restored 30 per cent after referring to the depreciation schedule provided in the Rules. The Commissioner (Appeals) held that item No. 7(D) of 3 Appendix I covered the rig and compressor. The Tribunal relying on a decision of the Madras High Court in Commissioner of Income Tax Vs. Popular Borewell Service and others, affirmed the order of the Commissioner (Appeals).

It is contended by Mr. L.M. Lodha learned counsel appearing for the revenue that the judgment of the Madras High Court in Commissioner of Income Tax Vs. Popular Borewell Service and others, has not been correctly interpreted by the Tribunal. The Madras High Court held that merely because the rig and compressor are mounted on a lorry to facilitate their easy and convenient transport from one place to another, it cannot be said that the rig and compressor either constitute integral parts of a lorry by themselves or can appropriately called or known as "lorry". It is submitted that the rig and compressor used for borewells mounted on a lorry cannot be held to fall under the category of motor-lorry occurring in Entry No. III(ii) D(a) of Part I of the Appendix I of the Income Tax Rules, 1962. We are satisfied that a referable question of law arises from the order of Tribunal.

Consequently we direct the Tribunal Jaipur Bench to state the statement of fact and refer the question of law referred above for the opinion of this court.

OPEN