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Additional Commissioner of Income-tax Vs. SuessIn Textile Ball Bearings Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference Nos. 392 and 392A, 392B of 1978
Judge
Reported in(1986)55CTR(Bom)50; [1987]163ITR582(Bom); [1986]26TAXMAN414(Bom)
ActsIncome Tax Act, 1961 - Sections 80J, 84 and 84(1); Income Tax Act, 1922 - Sections 15C
AppellantAdditional Commissioner of Income-tax
RespondentSuessIn Textile Ball Bearings Ltd.
Excerpt:
.....or plant previously used and transferred to new industrial undertaking does not exceed 20% of total value of building, machinery or plant used in business - then benefit of partial exemption conferred by section 84 cannot be denied - in view of this it would be idle exercise to answer question and send matter back to tribunal - revenue has not preferred any application for reference against decision of tribunal - question posed is purely academic - purely academic questions need not be answered by court. - - moreover, there was an explanation at the end of sub-section (3) of section 84, but it was applicable to that entire section, and that explanation clearly provides that in case the total value of the building, machinery or plant previously used and transferred to the new..........?'3. we find that the question raised before us is, to a large extent, covered by the decision of division bench of this court in cit v. suessin textiles, ball bearing & products (p.) ltd. : [1979]118itr45(bom) . this decision was rendered on a claim made by the same assessee as the one before us under section 15c of the indian income-tax act, 1922, in respect of the assessment year 1961-62. the division bench took the view that for the purposes of section 15c(2)(i) of the indian income-tax act, 1922, it is not necessary that the building transferred to the newly started undertaking must have been previously used by the assessee himself in any other business and that a building earlier used for business by a stranger is included in the mischief contemplated in the said clause. it was.....
Judgment:

Kania, J.

1. These three references arise from a common order of the Income-tax Appellate Tribunal. The relevant facts in the said references and the questions referred to us are identical, and hence we propose to dispose of these references by this common judgment.

2. The assessee is a limited company incorporated under the Companies Act. The assessee set up a factory for manufacturing textile machinery parts. For setting up this factory it purchased new plant and machinery and installed the same in a portion of a building in the Laxmi Woollen Mill's estate which it took on lease and which had been previously used by an earlier occupant for the purposes of business. The assessee also took on lease a portion of the Bank of Baroda Building in the same estate for its office, and these premises had also been previously used by the earlier occupant thereof for purposes of business The assessee claimed the benefit of partial exemption from income-tax provided under the provisions of section 84 of the Income-tax Act, 1961 as it stood at the relevant time). In respect of the assessment years 1963-64, 1964-65 and 1965-66, with which we are concerned, the Income-tax Officer concerned rejected the claim of the assessee on the ground that the new industrial under-taking of the assessee was formed by the transfer to the new business of a building previously used for other businesses. On appeals filed by the assessee the Appellate Assistant Commissioner allowed the claim of the assessee. The Revenue filed appeals before the Income-tax Appellate Tribunal. The Tribunal took the view that under clause (ii) of sub-section (2) of section 84, the assessee in this case could be denied the benefit of the partial exemption conferred by sub-section (1) of that section only if it was found that the industrial under taking of the assessee was formed by transfer to the new business of a building previously used by the assessee for any other purpose. In view of this conclusion, the Tribunal allowed the claim for partial exemption made by the assessee In the aforesaid assessment years. Arising from this decision of the Tribunal the following question has been referred to us for determination :

'Whether, of the facts and in the circumstances of the case, the assessee-company was entitled to relief from tax under section 84 of the Income-tax 1961 ?'

3. We find that the question raised before us is, to a large extent, covered by the decision of Division Bench of this court in CIT v. Suessin Textiles, Ball Bearing & Products (P.) Ltd. : [1979]118ITR45(Bom) . This decision was rendered on a claim made by the same assessee as the one before us under section 15C of the Indian Income-tax Act, 1922, in respect of the assessment year 1961-62. The Division Bench took the view that for the purposes of section 15C(2)(i) of the Indian Income-tax Act, 1922, it is not necessary that the building transferred to the newly started undertaking must have been previously used by the assessee himself in any other business and that a building earlier used for business by a stranger is included in the mischief contemplated in the said clause. It was further held that the lease taken by the assessee of a portion of the building and a portion of the estate for setting up its factory amounted to 'transfer to a new business of building. . . previously used in any other business' occurring in section 15C(2)(i) of the Act. On the basis of this finding, the Division Bench came to the conclusion that the assessee was not entitled to the partial exemption claimed by it. The provisions of section 15C of the Indian Income-tax Act, 1922, are in pari materia with the provisions of section 84 (now repealed) of the Income-tax Act, 1961, as it stood at the relevant time. It is true that a Division Bench of the Gujarat High Court has taken a view contrary to the one taken by the Division Bench of this court as aforesaid in the case of CIT v. Sussein Textile Bearing Ltd. : [1982]135ITR443(Guj) . But in accordance with the rules of precedence and practice it is but proper that we should follow the decision of the Division Bench of this court referred to by us earlier.

4. In these circumstances, we should have answered the question referred to us in the negative and in favour of the Revenue; but, in the present case, we find that no useful purpose would be served by answering the question and sending the matter back to the Tribunal.

5. We find that when the matter went back to the Tribunal pursuant to the decision of the Division Bench in CIT v. Suessin Textiles, Ball Bearing & Products (P.) Ltd. : [1979]118ITR45(Bom) , the Tribunal investigated the facts and found that the total value of the leasehold premises utilised by the assessee as aforesaid was insignificant compared to the other assets of the assessee-company. The Tribunal pointed out that this value was so insignificant that it was not even shown in the balance-sheet and hence, the assessee could not be denied the benefit of the relief conferred under section 15C(1) of the Indian Income-tax Act, 1922. It was submitted by Mr. Jetly, learned counsel for the Revenue, that, notwithstanding this, we should answer the question referred to us against the assessee and leave the Tribunal to investigate the facts separately, because the relevant assessment years in the present reference are different from the relevant assessment years in the case decided by the Division Bench of this court referred to earlier. We see no reason to adopt this course. The fact that the assessment years are different would not make any difference, because what the Tribunal will have to consider is only the position as it was at the time of the formation of the new industrial undertaking, because under the afore-mentioned provision it is the situation at the time of the formation of the new industrial undertaking which is relevant to determine whether the industrial undertaking was disentitled to the partial exemption granted under section 84(1) as it stood during the relevant time by reason of the provision of clause (i) or (ii) of sub-section (2) thereof. Moreover, there was an Explanation at the end of sub-section (3) of section 84, but it was applicable to that entire section, and that Explanation clearly provides that in case the total value of the building, machinery or plant previously used and transferred to the new industrial undertaking does not exceed 20 per cent. of the total value of the building, machinery or plant used in the business, the benefit of partial exemption conferred by section 84 cannot be denied. In view of this, it would be nothing but an idle exercise to answer the question and send the matter back to the Tribunal. We may point out that the Revenue has not preferred any application for reference against the aforesaid decision of the Tribunal, and hence the question posed to us is purely academic. It is well settled that purely academic questions need not be answered by the court. In view of this, we decline to answer the question referred to us.

6. Considering all the facts and circumstances of the case, there will be no order as to the costs of these references.


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