No rectification to reduce depreciation on vapour absorption machine at 25% if it was eligible to 100% depreciation

Section 32, read with section 154, of the Income-tax Act, 1961, read with Appendix-I, of the Income-tax Rules, 1962 - Depreciation - Allowance /Rate of (Vapour Absorption Machine) - Assessment year 2000-01 - Assessing Officer found that depreciation on Vapour Absorption Machine, an energy saving device was to be allowed to assessee at rate of 100 per cent - Whether proceedings under section 154 by merely stating that Vapour Absorption machine was a part of Centralized Air Conditioner and liable for depreciation at 25 per cent was not justified as same was counter to Para III, 3(iii)D(b) of Appendix-I to Income-tax Rules, 1962 - Held, yes

FACTS

■		The Assessing Officer found that depreciation on Vapour Absorption Machine, an energy saving device, was allowed to the assessee at the rate of 100 per cent instead of 25 per cent. Therefore, the Assessing Officer recomputed the depreciation at 25 per cent under section 154.
■		The assessee preferred an appeal before the Commissioner (Appeals). On appeal the Commissioner (Appeals) placing reliance on Appendix-I to the Income-tax Rules, 1962, which states that energy saving devices includes vapour absorption refrigeration systems, held that Vapour Absorption machine system was eligible for 100 per cent depreciation. However, the plea of the assessee that the Assessing Officer was not justified in passing an order under section 154 was rejected by the Commissioner (Appeals).
■		On cross appeal, the Tribunal, took the view that the issue as to whether Vapour Absorption Machine System was liable for 100 per cent depreciation or not was a debatable issue, which required examination of materials, details, particulars and application of mind and could not be rectified in the proceedings initiated under section 154 and consequently, held that the Assessing Officer lacked jurisdiction to exercise the power under section 154. The Tribunal, thus, dismissed the appeal filed by the revenue and allowed the cross-objection filed by the assessee.

HELD

■		The revenue tried to plead that vapour absorption machine installed by the assessee is part of the centralized air conditioner and it cannot be used as an independent machine and, therefore, depreciation at 25 per cent should only be allowed.
■		The said plea raised by the revenue cannot be accepted as it is evident from the order of the Commissioner (Appeals) that Vapour Absorption System is included in Energy Saving Devices specified in Para III, 3(iii) D(b) of Appendix-I to the Income-Tax Rules, 1962 and is eligible for 100 per cent depreciation. When there is a specific provision in the Income-Tax Rules allowing depreciation at 100 per cent to Vapour Absorption System and the same was granted by the Assessing Officer at the first instance, the subsequent proceedings for rectification under section 154 by merely stating that Vapour Absorption Heat Pump is a part of the Centralized Air Conditioner and liable for depreciation at 25 per cent, without giving any reasons, runs counter to Para III, 3(iii) D(b) of Appendix-I to the Income-tax Rules, 1962. Therefore, the Tribunal was justified in dismissing the appeal filed by the revenue and allowing the cross appeal filed by the assessee.