Punjab-Haryana High Court
Commissioner Of Income Tax vs Vardhman Spinning & General Mills Ltd. on 13 August, 1997
Equivalent citations: (1998)148CTR(P&H)276
JUDGMENT G.S. Singhvi, J.
In IT Case No. 47 of 1994 which relates to the assessment year 1977-78, the revenue has sought reference of the following questions of law:
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law and on the facts in allowing weighted deduction under section 35B of the Income Tax Act, 1961, in respect of payment of Rs. 52,031 paid to Indian Cotton Mills Federation?
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the Commissioner (Appeals) in allowing expenditure amounting to Rs. 63,291 relating to the paper project intended to be set up at Saharanpur (UP) as revenue expenditure whereas the expenses are in the nature of capital expenditure?
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the Commissioner (Appeals) allowing capitalisation of interest (for the purpose of allowing depreciation and development allowance) paid to Industrial Development Bank of India in respect of loan raised for purchase of new machinery when the interest on such loans was payable for the year under consideration and for five subsequent years, though such capitalisation is specifically prohibited under the provisions of Explanation 8 to sub-section (1) of section 43 (inserted by the Finance Act, 1986 with retrospective effect from 1-4-1974)?
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the Commissioner (Appeals) with regard to grant of extra shift allowance on the cost of electric installations, though the provisions of sub-clause (5) (IV) (Extra shift depn. allowance) of clause III (Machinery & Plant) of Part I of Appendix I of the Income Tax Rules, 1962, specifically prohibits extra shift depreciation allowance on electrical machinery?"
2. In IT Case No. 82 of 1995 which relates to the assessment year 1981- 82, the revenue has sought reference of the following questions:
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing extra shift allowance to the assessee on the basis of working of the concern rather than on the basis of working of each machinery extra shift and not even on the basis of working of each unit extra shift of the concern?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing extra shift allowance on electric installations, transformers and sub-stations which are stationary installations."
Since question No. 4 sought to be raised in IT Case No. 47 of 1994 and the two questions sought to be raised in IT Case No. 82 of 1995 are common to both the petitions, we are deciding them by one order.
3. Assessment in respect of the respondent for the year 1977-78 was completed by the Inspecting Assistant Commissioner, Ludhiana, vide his order dated 31-3-1980. In the appeal filed before the Commissioner (Appeals), relief was granted to the assessee in the form of deductions under section 35B of the Income Tax Act, 1961 (hereinafter referred to as `the Act') on the expenditure relating to the paper project intended to be set up at Saharanpur, the amount of interest in respect of the machinery purchased on deferred payment basis etc. Feeling aggrieved by the order of the Commissioner (Appeals), the revenue preferred an appeal before the Tribunal, Chandigarh Bench, which upheld the order passed by the Commissioner (Appeals). The reference application filed by the revenue under section 256(1) of the Act has been rejected by the Tribunal.
In respect of the assessment year 1981-82, the assessing authority disallowed the claim of the assessee regarding extra shift allowance on electrical installations, transformer and an electric sub-station. However, the Commissioner (Appeals) accepted the assessee's plea and granted the benefit of extra shift allowance. The appeal filed by the revenue has been dismissed by the Tribunal, Chandigarh Bench. Reference application has also been dismissed by the Tribunal.
4. As far as the first question raised in T Case No. 47 of 1994 is concerned, we find that an identical question was raised in CIT v. Vardhman Spinning & General Mills Ltd. [IT Case No. 42 of 1986] (assessment year 1973-74) and CIT v. Vardhman Spinning & General Mills Ltd. [IT Case No. 69 of 1986] (assessment year 1976-77), both of which stand dismissed by the High Court.
In respect of the second question, Shri Sawhney relied on the judgment of this court in CIT v. Dharam Pal Shanti Sarup (1978) 114 ITR 411 (P&H) and argued that the question sought by the revenue is a question of law which the Tribunal should be directed to refer to this court. He submitted that ultimate decision of the question is not relevant for the purpose of directing the Tribunal to make reference. Shri B.S. Gupta submitted that normally question No. 2 can be treated as a question of law, but in view of the decisions in CIT v. Alembic Glass Industries Ltd. (1976) 103 ITR 715 (Guj), CIT v. Oswal Spg. & Wvg. Mills Ltd. (1986) 160 ITR 426 (P&H), CIT v. Lakshmi Printing Co. (1995) 211 ITR 172 (P&H) and CIT v. Shiv Parshad (1984) 146 ITR 397, this question can no longer be treated as a question of law. Shri Gupta also relied on the decision in CIT v. Anand Iron & Steel Industries (1989) 179 ITR 620(Del). He further submitted that for the year 1980-81 also the appellate authority has taken the same view and, therefore, there is no necessity to refer the question to the court.
In respect of question No. 4 IT Case No. 47 of 1994 and the two questions raised in IT Case No. 82 of 1995, Shri Sawhney relied on the decision of this court in G.N.A. Enterprises (P) Ltd., v. CIT (1996) 219 ITR 400 (P&H) and submitted that the question should be directed to be referred to this court.
5. Having thoughtfully considered the rival contentions, we are of the opinion that question No. 1 sought by the revenue does not require to be referred to the court in view of the decision of IT Case No. 42 of 1986 and IT Case No. 69 of 1986.
Question No. 2 raised in IT Case No. 47 of 1994 is a question of law which the Tribunal should refer to this court in the following form:
"Whether, on the facts and in the circumstances or the case, the Appellate Tribunal was right in law in upholding the order of the Commissioner (Appeals) in allowing the expenditure amounting to Rs. 63,291 relating to the paper project intended to be set up at Saharanpur (UP) as revenue expenditure thereon?"
Question No. 3, in our opinion, does not require reference. Question No. 4 raised in IT Case No. 47 of 1994 is a question of law which, in our opinion, should be directed to be referred to this court in the following form:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in upholding the orders passed by the Commissioner (Appeals) with regard to the grant of extra shift allowance on the cost of electrical installations?"
6. We are further of the opinion that the following question of law should be directed to be referred to this court in IT Case No. 82 of 1995:
"Whether, Commissioner and the Tribunal have rightly allowed the claim of the assessee in respect of the extra shift allowance by treating the concern as a whole?"
7. We have refrained from dealing with the various decisions cited by the learned counsel for the parties because those decisions primarily pertain to the merits of the rival contentions and in our considered view, it is not proper for the court to examine the merits of the case while directing the Tribunal to refer the questions of law.
8. In the result, the two applications are disposed of by directing the Tribunal to refer the questions formulated hereinabove. The Tribunal should state the case to the court and submit the record of both the cases for the purpose of adjudication of the questions which we have directed it to refer to this court.