Madras High Court
Commissioner Of Income-Tax vs L.G. Balakrishnan And Brothers Ltd. on 22 April, 1999
Equivalent citations: [2001]247ITR131(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT R. Jayasimha Babu, J.
1. The facts, as found by the Commissioner, which facts have not been departed from by the Tribunal, are that the appellant-company received deposits from the members of the public and for a portion of the liability, created charge on its fixed assets by entering into a trust deed with some of its directors as trustees and registered the charge as statutorily required, with the Registrar of Companies, Madras. The deed, however, was not registered under the provisions of the Registration Act.
2. The Tribunal on the short ground that the deed had not been registered under the Registration Act, upheld the order of the Income-tax Officer and reversed that of the Commissioner. It is the correctness of that decision which has been called into a question by the assessee and the Tribunal has referred the following questions to this court :
"1. Whether, on the facts and in the circumstances of the case, a valid charge or mortgage has been created by the deed of hypothecation trust dated April 30, 1981 ?
2. Whether, on the facts and in the circumstances of the case, part of the interest on fixed deposits from the public was liable to be disallowed under Section 40A(8) of the Income-tax Act, 1961 ?"
3. This court in the case of L. G. Balakrishnan and Brothers Ltd. (Combined Industrials Ltd.) v. CIT [2000] 245 ITR 743, in similar circumstances, held that the registration of the charge with the Registrar of Companies under Section 125 of the Companies Act, 1956, would prove the creation of a valid charge over the immovable properties of the company and once there is a valid charge, which was registered under the relevant provisions of the Companies Act, the assessee-company would be satisfying the requirements of Sub-clause (ix) of Clause (b) of Section 40A(8) of the Income-tax Act.
4. As noticed above, the existence of the hypothecation deed and the registration of the charge with the Registrar of Companies were at no point of time in dispute. The absence of registration under the Registration Act is the only reason given by the Tribunal for denying the benefit of Sub-clause (ix) of Clause (b) of Section 40A(8) of the Act to the assessee. Section 40A(8) was repealed in the year 1986. The assessments with which we are concerned here are those relating to the assessment years 1982-83 and 1983-84.
5. Following the decision of this court referred to earlier, we answer the questions referred to us in favour of the assessee and against the Revenue.
6. There is one more question and that question is as follows :
"Whether, on the facts and in the circumstances of the case, interest paid under deferred payment schemes for the purchase of plant and machinery should be treated as part of the actual cost of assets for the purpose of allowing depreciation and investment allowance and additional depreciation ?"
7. The above question has been referred to us at the instance of the Revenue. It is submitted before us by counsel that this question is similar to the one that was considered by this court in Tax Case No. 676 of 1989 (CIT v. India Pistons Ltd. ), dated November 9. 1998, in which the question was answered in favour of the Revenue and against the assessee.
8. Following the judgment in Tax Case No. 676 of 1989 (CIT v. India Pistons Ltd. ), and for the reasons stated therein, we answer the question referred to us at the instance of the Revenue, in favour of the Revenue and against the assessee.
9. Having regard to the equal success of the parties, the parties are directed to bear their own costs.