M/S. SARASWATI INDUSTRIAL SYNDICATE LTD. versus THE COMMISSIONER OF INCOME TAX, HARYANA, ROHTAK

Citation: [1999] 1 S.C.R. 974 · Decided: 10-03-1999 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
MIS. SARASWATI INDUSTRIAL SYNDICATE LTD. 
v. 
THE COMMISSIONER OF INCOME TAX, 
HARYANA,ROHTAK 
MARCH 10, 1999 
(S.P. BHARUCHA, S.S. MOHAMMED QUADRI AND 
R.C. LAHOTI, JJ.] 
Income Tax Rules, 1962 : 
Appe11dix-l, Part I, Para Ill Item 3(ii) B(7}-Machinery and plant used 
in manufacture of sugar-Claim for special rate of depreciation as c01rosive 
chemicals were being used in the process-Expert opinion filed in support-In-
come Tax officer declining to consider expe1t opinion on ground that expert 
was not produced-Claim rejected-Held, neither the Income Tax Officer nor 
D the High Court entitled to make stateme11t on technical matters for which no 
basis had been laid on record-High Court should have asked the Tribunal 
to take further evidence and draw up a supplemental statement of 
case-Under the relevant ent1y it is not intended that machinery must come 
into contact with a pure corrosive chemicaHt is enough that what passes 
E through the machinery contains chemicals which are corrosive-Tribunal 
shall take further evidence and prepare a supplemental statement of case on 
the basis whereof matter shall be re-heard by High Court. 
Practice and Procedure-Intervention application-Held, only purpose 
of granting the application is to entitle intervenor to address arguments in 
F support of one or the other side. 
The assessee, a manufacturer of sugar, claimed before the Income 
Tax Officer depreciation of higher rate of 15% on machinery it used in the 
manufacture of sugar, contending that the machinery was covered under 
Item 3(ii) 8(7) of Para III of Part I of Appendix I to the Income Tax Rules, 
G 1962; and in support of his claim, filed the opinion of an expert. The 
Income Tax Officer declined to consider the expert opinion on the ground 
that the expert was not produced for cross-examination. He rejected the 
assessee's claim holding that the corrosive chemicals were used in insig-
nificant quantity to treat the cane juice and it was not those acids, but the 
H cane juice which was the main substance that came .into contact with the 
974 
SARASWATI INDUS1RIALSYNDICATE LTD. v. C.I.T. 
975 
machinery. The appeal filed by the assessee was dismissed by the Appellate A 
Assistant Commissioner holding that depreciation was allowable at the 
higher rate on such plant and machinery in which chemicals with high 
corrosive potential were used for manufacturing purpose and manufacture 
of sugar did not fall in such category. The Income Tax Appellate Tribunal 
disagreed with the view taken by the authorities below and held that the 
corrosive chemicals contemplated in the relevant entry were not only free 
chemicals but also non-free ch~micals provided they were corrosive in 
effect so far as metals were concerned. The reference made to the High 
Court was answered against the assessee. Aggrieved, the assessee filed the 
present appeals. 
Allowing the appeals and remitting the matter to the Tribunal, this 
Court 
HELD : 1.1. Neither the Income Tax Officer nor the High Court was 
B 
c 
entitled to make statement on technical matters for which no basis had D 
been laid on the record by either the Revenue or the assessee. It can be 
understood that the authorities declin~d to rely upon the expert's opinion 
because he was not produced for cross-examination. But in case the High 
Court was of the view that further material was required, the appropriate 
course was to require the Tribunal to take further evidence and draw up 
a Supplemental Statement of case. (978-E] 
E 
1.2. This apart, there appears to be some misunderstanding of what 
entry at Item 3(ii) B (7) of Para III of Part I of Appendix I to Income Tax 
Rules, 1962 is intended to convey. Depreciation at a higher rate is allowed 
to machinery that comes into contact with corrosive chemicals. Corrosive 
F 
chemicals corrode the machinery. They erode and, by reason of such 
erosion, the life of the machinery is truncated. To compensate, deprecia-
tion is allowed at a higher rate. It is not intended that the machinery must 
come into contact With a pure corrosive chemical. It is enough that what 
passes through the machinery contains chemicals which are corrosive and 
which, therefore, have the effect of wearing it down. Keeping this in mind G 
the Tribunal shall give both the assessee and the Revenue the opportunity 
of producing further evidence, and, based thereon, shall decide whether 
.> 
the machinery for which the assessee claims depreciation at the higher 

Excerpt shown. Read the full judgment & AI analysis in Lexace.