Madras High Court
Parkside Explosives & Industries Ltd. ... vs Cit on 17 January, 2005
Equivalent citations: [2005]278ITR561(MAD)
Author: N.V. Balasubramanian
Bench: N.V. Balasubramanian
JUDGMENT N.V. Balasubramanian, J.
The Income Tax Appellate Tribunal has referred the following question of law :
"2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the appellant was not entitled for the claim for extra-shift allowance on plant and machinery leased out when it is eligible for normal depreciation?"
The matter pertains to the assessment year 1986-87. The assessee in this case engaged in the business of leasing and it claimed extra-shift allowance on the machinery leased out on the basis of the certificates issued by the lessees for the number of days the machinery worked on extra shift. The assessing officer, during the course of the assessment proceedings, examined and allowed the claim of the assessee for extra-shift allowance, by his order, dated 23-3-1989, passed under section 143(3) of the Income Tax Act, 1961 (hereinafter be referred to as "the Act").
The Commissioner of Income Tax invoked his revisional power under section 263 of the Act and held that on the basis of the decision of the Delhi Bench of the Tribunal, in the case of Shri Leasing & Industrial Finance Co. Ltd. v. ITO (1989) 31 ITD 163, the assessee is not entitled to claim extra-shift allowance, as the concern which uses the machinery for its own business alone would be entitled to claim extra-shift allowance and it is not available to the assessee. which is engaged in the business of leasing out plant and machinery. In this view of the matter, the Commissioner of Income Tax set aside the order of assessment and directed them to withdraw the allowance granted to the assessee.
The assessee challenged the order of the Commissioner of Income Tax before the Income Tax Appellate Tribunal. The assessee in the appeal has questioned the order of the Commissioner of Income Tax on two grounds : One on the ground of jurisdiction and the other on the ground that the view entertained by the Commissioner of Income Tax that the assessee is not entitled to extra-shift allowance is not correct. The Income Tax Appellate Tribunal rejected both the contentions and held that the Commissioner had the jurisdiction under section 263 of the Act to revise the order of assessment, and on the merits it held that the assessee was not entitled to extra-shift allowance and the order of assessment was erroneous and prejudicial to the interests of the revenue, as by allowing extra-shift depreciation more relief was given to the assessee than what was allowed to it and hence, it held that the Commissioner had properly exercised his jurisdiction under section 263 of the Act and upheld the order of the Commissioner of Income Tax. The Tribunal, therefore, rejected the claim of the assessee. Aggrieved by the said order of the Tribunal, the assessee sought a reference under section 256(1) of the Act requesting the Tribunal to refer to this court the following questions of law :
"1. Whether, on the facts and circumstances of the case, the Tribunal was right in upholding the order of the Commissioner under section 263 of the Act directing the assessing officer to withdraw the extra-shift allowance allowed by him as erroneous in so far as it was prejudicial to the interests of the revenue?
2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the appellant was not entitled for the claim for extra-shift allowance on plant and machinery leased out when it is eligible for normal depreciation?"
The Tribunal, while stating the case, referred only the second question on the ground that the question referred would encompass the issue raised in the first question as well, and, hence, the reference has been made only on the second question of law set out earlier.
We have heard Mr. P.P.S. Janarthana Raja, learned counsel appearing for the assessee, and Mr. K. Subramanian learned senior Central Government standing counsel appearing for the income-tax department.
Mr. Janarthana Raja, learned counsel, brought to our attention the decision of the Karnataka High Court in CIT v. Maharashtra Apex Corporation Ltd. (1998) 234 ITR 484 (Karn), wherein the Karnataka High Court has held as under (page 487) :
"So far as the claim of the extra shift allowance is concerned, as already noticed by us, section 32(ii) of the Act provides for grant of depreciation. This section, inter alia, provides that in respect of depreciation of machinery, plant, etc., owned by the assessee and used for the purpose of business or profession certain deduction will be admissible. The basic requirement for claiming this deduction as well is the same as for claiming the investment allowance dealt with by us in the foregoing paragraphs. Therefore, for those very reasons, we hold that the assessee is entitled for extra shift allowance as well."
Learned counsel further submits that the decision of the Karnataka High Court was taken on appeal before the Supreme Court and the Supreme Court upheld the judgment of the Karnataka High Court in CIT v. Maharashtra Apex Corporation Ltd. (2002) 254 ITR 98 (SC). He, therefore, submitted that since the Supreme Court has affirmed the judgment of the Karnataka High Court, this court is bound by the said judgment of the Supreme Court and the order of the Tribunal holding that the assessee is not entitled to extra-shift allowance is not sustainable in law.
Mr. K. Subramaniam, learned senior standing counsel for the income-tax department, on the other hand, submitted that the decision of the Supreme Court proceeds on the concession made by learned counsel for the revenue appeared before the Supreme Court and it was a wrong concession. He further submitted that the decision in CIT v. Maharashtra Apex Corporation Ltd. (1998) 234 ITR 484 (Karn) is not applicable to the case of extra-shift allowance, as it only relates to the case of investment allowance. He, therefore, submitted that since on the basis of the wrong concession made before the Supreme Court by learned counsel for the revenue the decision has been rendered by the Supreme Court, the said decision of the Supreme Court is not binding. We have carefully considered the submissions of learned counsel for the assessee and learned senior standing counsel for the Income Tax Department. We have already noticed the decision of the Karnataka High Court in CIT v. Maharashtra Apex Corporation Ltd. (1998) 234 ITR 484 (Karn), wherein the Karnataka High Court has held that the basic requirement for claiming extra-shift depreciation is the same as for claiming the investment allowance. The Karnataka High Court held that where the assessee has given its plant and machinery for lease, the assessee is entitled to claim extra-shift allowance. The decision of the Karnataka High Court was taken on appeal before the Supreme Court in CIT v. Maharashtra Apex Corporation Ltd. (2002) 254 ITR 98 (SC), and the Supreme Court has affirmed the judgment of the Karnataka High Court. It is not a case of rejection of the special leave petition preferred against the judgment of the Karnataka High Court, but it was the decision of the Supreme Court rendered in the appeal. Though learned senior standing counsel for the income-tax department would submit that a wrong concession was made before the Supreme Court, we are of the view that it is the decision of the Supreme Court and we are bound by the same. Hence, we hold that the issue raised in the question referred is required to be answered against the revenue as it is covered by the decision of the Supreme Court in CIT v. Maharashtra Apex Corporation Ltd. (2002) 254 ITR 98 (SC). Following the said decision, we hold that the Income Tax Tribunal was not correct in holding that the assessee is not entitled to claim extra-shift allowance on the plant and machinery leased out. In the view we have taken, we are not examining the question regarding jurisdiction of the Commissioner of Income Tax in passing the order of the assessing officer.
Consequently, we answer the question referred to us in the negative and in favour of the assessee and against the revenue. The assessee will be entitled to a costs of Rs. 500.