DINESH MAHESHWARI,J. - (1.) THIS application under Section 256(2) of the IT Act, 1961 ('the Act') has been moved by the CIT, Jodhpur because the Tribunal, Jaipur Bench, Jaipur has refused the application made by the Department to refer the following as a question of law to this Court: Whether on the facts and in the circumstances of the case the Hon'ble Tribunal was legally justified in allowing terminal allowance under Section32(1)(iii) of the IT Act?
(2.) THE question aforesaid was proposed for reference in the background of the facts that the assessee M/s Anop Udai Works is a registered firm engaged in manufacture of sarees During the period relevant to the asst yr 1983 -84, the assessee debited an amount of Rs. 1,97,926 towards repairs and maintenance, and this included a sum of Rs. 1,31,305 which was claimed as terminal allowance by the assessee under Section 32(1)(iii) of the Act towards the alleged discarded copper rolls The Assessing Officer ('the AC) referred to the relevant entry in the account and posed a question in relation thereto that the rolls seem only to have been revalued and not discarded to which the assessee submitted a copy of rolls accounts and claimed the amount to be allowable under Section 32(1)(iii) of the Act The learned AO was not satisfied with the reply and observed that the rolls in question have neither been sold nor destroyed nor discarded The learned AO further observed that manufacturing process could not have been undertaken without such rolls, and the amount claimed by the assessee at Rs. 1,31,305 was the depreciated value of the existing rolls but no new rolls were purchased during the year under consideration The learned AO thus disallowed the claim made on the basis of alleged discard of rolls and considered it to be a case only of revaluation. The contention of the assessee against rejection of such claim towards terminal allowance on rolls account was not accepted in appeal either, and the CIT (A) observed that the claim of the appellant was not covered under any of the instances mentioned in Section 32(1)(iii) of the Act and confirmed disallowance in that regard.
(3.) HOWEVER , the Tribunal, Jaipur Bench, Jaipur accepted the contention of the assessee with the observation that it was only the assessee who was competent to judge the utility or obsolescence of any equipment, and once the assessee decides that the rolls are no longer usable, they are said to be discarded even though, physically they might remain with the assessee, and terminal allowance has to be granted unless evidence was brought on record about they being used The Tribunal observed that merely because there was no new purchase of rolls, it cannot mean that written off rolls were used because the assessee was having with it the stock of usable rolls The consideration by the learned Tribunal in its judgment dt. 12th July, 1995 reads thus: 10. During the year the assessee debited Rs. 1,97,926 as repairs and maintenance This included Rs. 1,31,305 on account of discarded copper rolls which was claimed as terminal allowance by the assessee under Section 32(1)(iii) The AO refused to allow the claim of the assessee as, in his opinion, the assessee had not discarded the rolls but had merely revalued them The learned CIT (A) also confirmed the disallowance. 11. We see no reason to disbelieve and disallow the claim of the assessee It is only the assessee who is competent to judge the utility or obsolescence of any equipment Once the assessee decides that the rolls are no longer usable, they are said to be discarded even though, physically they may be with the assessee, and terminal allowance has to be granted unless an evidence that they are being used is brought on record No such evidence has been brought on record by the Department The fact that there are no new purchases of rolls does not mean that the written off rolls are used, because the assessee is having a stock of usable rolls with it Hence, we allow the ground of the assessee with a direction that terminal allowance of Rs. 1,31,305 be allowed under Section 32(1)(iii) ;