Madhya Pradesh High Court
Hindustan Electro Graphites Ltd. vs Dy. Commissioner Of Income-Tax on 9 February, 2011
+HIGH COURT OF MADHYA PRADESH, JABALPUR
I.T.R.No.6/1996
Hindustan Electro Graphites Ltd.
Mandideep,
District Raisen
....Applicant
Versus
Deputy Commissioner of Income Tax,
(Assessment),
Special Range,
Bhopal.
....Respondent
Present : Hon. Shri Justice Krishn Kumar Lahoti,
Hon.Smt. Justice Sushma Shrivastava
Shri Mukesh Agarwal, counsel for applicant.
Shri Sanjay Lal, counsel for respondent.
ORDER
(9.2.2011) The Income Tax Appellate Tribunal, Indore Bench, Indore in R.A.No.89/Ind/95, Assessment Year 1987-88 has referred following question for the opinion of this Court under section 256 of the Income Tax Act, 1961 (as was in the statute book prior to 1.10.1998), by order dated 3.11.1995, which reads thus :-
"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in disallowing the expenditure of Rs.2,45,485/- under section 37(4) of the Income Tax Act, 1961, which was incurred by the assessee on the residential accommodation maintained by it in its industrial township for the stay of persons connected with its business ?"
2. We have heard learned counsel for the parties.
3. The facts of the case are that the assessee/company was maintaining a residential accommodation at Mandideep, an industrial 2 I.T.R.No.6/1996 Hindustan Electro Graphites Ltd.
Vs. Dy.Comm. of Income Tax area, near Bhopal. This residential accommodation was situated in the compound of the assessee near staff colony. The assessee provided such accommodation with boarding facility and was maintained for stay of company's officials coming from outside, such as auditors, foreign technicians, Government officials and other persons connected with the business of the assessee company. The aforesaid accommodation was given in the nomenclature by the assessee as "Guest House". In the assessment year 1987-88 the assessee company claimed expenditure of Rs.2,45,485/- incurred for maintaining the accommodation in the caption "Guest House expenditure". The assessing officer disallowed the aforesaid expenditure, which was upheld in appeal by the CIT(Appeal) and also by the Appellate Tribunal. Thereafter the application was filed by the assessee for making a reference to the High Court under section 256 of the Act (as was earlier in the statute book) and the Tribunal referred the aforesaid question for the opinion of this Court.
4. Learned counsel appearing for the parties submitted that the controversy involved in this case is squarely covered by a judgment of this Court in Hindustan Electro Graphites Ltd Vs. Commissioner of Income Tax [(1998) 96 TAXMAN 163(MP)], by which a similar question has been decided by a Division Bench of this Court against the assessee. It is submitted that this matter be also decided in the light of the judgment of this Court in Hindustan Electro Graphites, the assessee in this case also, but in respect of earlier assessment years. In Hindustan Electro Graphites (supra) the Division Bench of this Court considering the question held thus :-
"This is a reference under s.256(1) of the IT Act, 1961 ('the Act') at the instance of the assessee and following question of law has been referred by the Tribunal for answer by this Court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in disallowing the expenditure of Rs.1,27,577 under s.37(4) of the IT Act, 1961 which was incurred by the assessee on the residential accommodation maintained by it in its industrial township 3 I.T.R.No.6/1996 Hindustan Electro Graphites Ltd.
Vs. Dy.Comm. of Income Tax for the stay of persons connected with its business ?"
2. Brief facts giving rise to this reference are that the assessee-company was maintaining a residential accommodation at Mandideep, and industrial township about 25 kilometers away from Bhopal. It was situated in the compound of the assessee's Staff colony. The said accommodation with facility was maintained for stay of Company's officials from Delhi, Auditors, foreign technicians, etc. Though the nomenclature given to this accommodation was guest house, the AO disallowed the entire expenditure in the sum of Rs.1,27,577 under s.37(4) of the Act as being impermissible. The assessee filed an appeal before the CIT (A). The CIT (A) confirmed the finding of the AO.
Therefore, the matter was taken up before the Tribunal and the Tribunal also confirmed the finding of the CIT(A). Thereafter, the assessee approached the Tribunal for making a reference before this Court and, accordingly, the Tribunal has made reference of the aforesaid question of law to this Court under s.256(1).
3. The assessee has not appeared despite notice. We have heard the learned counsel for the Revenue and perused the record. The main contention which was raised by the assessee before the Tribunal was that there is a general provision of depreciation, therefore, that should prevail as against the special provision as has been negatived on the s.(4) of s.37. This contention has been negatived on the principle of generalia specialibus non derogant which means that a particular provision excludes the general provision. Sub-s.(4) of s.37 specifically denies any depreciation on maintenance of such kinds of Guest Houses. This is a special provision and this will over-ride the general provisions of depreciation applicable in the Act. The Tribunal applying this principle has declined to grant any relief to the assessee and in our opinion, rightly so. One a particular provision has been made, then that provision will prevail as against the general provision. It is a well-known dictum which has been accepted and known as generalia specialibus non derogant.
4. In view of the above, the Tribunal has rightly approached the matter and denied the depreciation to the assessee in respect of expenditure in the sum of Rs.1,27,577. We answer the question in favour of the Revenue and against the assessee."
5. As the similar question has been answered by the Division Bench of this Court in favour of the Revenue and against the assessee and we 4 I.T.R.No.6/1996 Hindustan Electro Graphites Ltd.
Vs. Dy.Comm. of Income Tax do not find any reason to disagree with the aforesaid question. We are answering the question as has been answered by the Division Bench in Hindustan Electro Graphites (supra).
6. This Income Tax Reference is accordingly disposed of finally.
(Krishn Kumar Lahoti) (Smt.Sushma Shrivastava)
JUDGE JUDGE
M.