JUDGMENT
K. S. PARIPOORNAN, J. – The Revenue is the petitioner in this batch of four cases. In T.R.C. Nos. 154 of 1991, 159 of 1991 and 160 of 1991, the respondent is the same person who is an assessee under the Agricultural Income-tax Act. The respondent in T.R.C. No. 177 of 1992 is a different assessee under the Agricultural Income-tax Act. The first three revisions relate to the years 1975-76, 1976-77 and 1977-78. Tax Revision Case No. 177 of 1992 relates to the year 1977-78. The order of the Appellate Tribunal relevant for the first three tax revision cases is dated October 12, 1990. The order of the Appellate Tribunal relevant for T.R.C. No. 17 of 1992 is dated February 25, 1991. A common question arises for consideration in these cases. So, we are proposing to dispose of the four revisions by this common judgment.
We heard counsel for the Revenue, Senior Government Pleader, Shri V. C. James, and also counsel for the respondent Mr. Jose Joseph. The only short question that arises for consideration in these cases is as to whether there respondent-assessee is entitled to depreciation in respect of the sprinkler equipment. Admittedly, the sprinkler was being purchased on hire purchase basis. The assessing authority as also the first appellate authority negatived depreciation on the ground that the ownership is not with the assessee and hence depreciation is not admissible. The Agricultural Income-tax Appellate Tribunal, in disposing of the appeals, stated thus :
“Now, coming to the sprinkler equipment, the case of the lower authorities is that the sprinkler having been purchased on hire purchase basis, the ownership so not of the appellant and hence depreciation is not admissible. We are unable to subscribe to this view of the lower authorities. Depreciation is allowable on assets acquired on hire purchase basis. We, therefore, order the assessing authority to allow admissible depreciation on the sprinkler equipment”.
Feeling aggrieved by the decision of the Appellate Tribunal holding that the assessee is entitled to depreciation allowance on the sprinkler equipment, the revenue has come up in revision in this batch of four cases.
Though more than one question has been framed in each revision, it is agreed that the only question that arises for consideration is as to whether depreciation claimed by the assessee on the sprinkler equipment which was being purchased under hire purchase basis is allowable. Section 5(1) of the Kerala Agricultural Income-tax Act, 1950, is to the following effect
“(1) in respect of depreciation of building, machinery, plant and furniture which are the property of the assessee and are required for the purpose of deriving the agricultural income, a sum equivalent to such percentage on the written down value thereof as may in any case or class of cases be prescribed, and where the buildings have been newly erected or the machinery or plant newly installed a further sum subject to such conditions as may be prescribed :
Provided that full particulars have been duly furnished :
Provided further that the aggregate of all such allowances made under this Act, shall in no case exceed the original cost to the assessee of the buildings, machinery, plant or furniture, as the case may be;”
The section positively says that it is only in respect of the property of the assessee that depreciation is permissible. Admittedly, the sprinkler machine was being purchased by the assessee on hire purchase basis. The Tribunal has not found that the assessee is the owner of the property during the relevant accounting years for which depreciation is claimed. The Tribunal, on the other hand, adverted to the fact that the sprinkler is being purchased on hire purchase basis. The description of the Tribunal is suggestive of the fact that the ownership was not with the assessee during the relevant accounting year. On this premise, we are of the view that the Appellate Tribunal was in error in holding that the assessee is entitled to depreciation on sprinkler equipment.
But counsel for the respondent-assessee referred to us the agreement entered into by the assessee with the Coffee Board. The specimen of the agreement is dated March 13, 1968. Clauses 1, 3(b) and 7 of the said agreement are relevant. It is seen from clause 3(b) that the last installment is payable on March 30, 1974. It is further seen from clause 7 of the agreement that, if the entire amount due is paid including interest, then and not before, shall the machinery become the property of the hirer (assessee). As per the agreement which forms part of the paper books, the last instalment should have been paid even before the assessment year 1975-76. If that be so, the assessee has become the owner of the machinery and is entitled to depreciation allowance as per section 5(1) of the Act. But there is no such finding entered by the Appellate Tribunal. So, we are of the view that the Appellate Tribunal should peruse the agreement entered into by the assessee and verify whether the last instalment due under the hire purchase agreement has been paid before the particular assessment year has begun. If the last instalment has been paid, the assessee becomes the owner of the machinery and from then onwards he will be entitled to the allowance for depreciation, etc. The Appellate Tribunal has not cared to go through the terms of the hire purchase agreement or to understand its terms nor has the Appellate Tribunal verified as to whether the entire instalments due on hire purchase agreements has been paid. These are essential aspects which shall be looked into before entering a finding to whether the assessee is entitled to the depreciation allowance under section 5(1) of the Agricultural Income-tax Act. Without a finding on these essential aspects, the Appellate Tribunal had arbitrarily held that the assessee is entitled to depreciation allowance. This is improper. We set aside the orders of the Appellate Tribunal dated October 12, 1990, which are attacked in T.R.C. Nos. 154, 159 and 160 of 1991, as also the order of the Appellate Tribunal dated February 25, 1991, which hold that the respondent assessee is entitled to depreciation allowance in respect of the sprinkler machinery. Only to this extent, we set aside the order of the Appellate Tribunal in these four cases. We direct the Agricultural Income-tax Appellate Tribunal to restore the appeals to file and consider as to whether the respondent-assessee is entitled to the depreciation allowance in respect of the sprinkler machinery for the relevant assessment years. The Appellate Tribunal shall determine the matter within three months from the date of receipt of a copy of this judgment.
The tax revision cases are allowed to the above extent.