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Commissioner of Income-tax Vs. Punjab Iron and Steel Co. (P) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberI.T. Case No. 78 of 1976
Reported in(1980)14CTR(P& H)409
AppellantCommissioner of Income-tax
RespondentPunjab Iron and Steel Co. (P) Ltd.
Cases ReferredGujarat v. Shri Subhlaxmi Mills Ltd. and Keshavlal Vithaldas
Excerpt:
- sections 80 (2) & 89 & punjab motor vehicles rules, 1989, rules 85 & 80: [t.s. thakur, cj, jasbir singh & surya kant, jj] appeal against orders of state or regional transport authority imitation held, a stipulation regarding the period of limitation available for invoking the remedy shall have to be strictly construed. that is because any provision by way of limitation is in the nature of a restraint on the remedy provided under the act. so viewed two inferences are clear viz., (1) sections 80 and 89 of the act read with rule 85 of the rules make it obligatory for the authorities making the order to communicate it to the applicant concerned and (2) the period of limitation for any appeal against the order is reckonable from the date of such communication of the reasons would imply..........and under these circumstances it was not obligatory for the assessee to create any development rebate reserve ( : [1974]96itr1(bom) - tata iron & steel co. ltd. v. n. c. upadhaya & another). however, the assessee has created the requisite reserve by debiting the same to the profit and loss account. in our opinion, even if the assessee had not created any reserve during the years under consideration it was still entitled to the claim of development rebate in respect of the new machinery and plant installed or brought into use by it. of course, the development rebate could be allowed only during the years in which the assessee earned profit and it was only in those years that the assessee-company was under a legal obligation to create development rebate reserve equal to 75% of the.....
Judgment:

J. V. Gupta, J. - This is a petition u/s 256(2) of the IT Act, 1961 (hereinafter referred to as the Act), relating to the asst. yr. 1967-68, filed by the CIT, Amritsar, by virtue of which, the following question of law is required to be referred to this Court :

'Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the ITO to compute and allow the development rebate on a sum of Rs. 7,87,666/- when the machinery was admittedly installed in July, 1965 during the previous year relevant to the asst. yr. 1966-67 and there is no finding to the effect that the machinery in question was put to use in the succeeding year.'

The Income-tax Appellate Tribunal vide its order dated 12th January, 1976, dismissed the application of the department u/s 256(1) of the Act, observing that the question of law as proposed in the present case did not arise out of the order of the Tribunal. The relevant observations are :

'From the facts stated above, it is obvious that the question of law as proposed in the present reference application does not arise out of the order of the Tribunal. The question whether the machinery on which development rebate was directed to be allowed was put to use in succeeding years after it was installed in July, 1965, was neither raised not was decided by the Tribunal and hence we decline to refer the question and hence we decline to refer the question as proposed in the present reference application.'

Brief facts are that the assessee-company manufactures steel and runs a Rolling Mill. On 6th July, 1965, the assessee company installed an electric furnace at a total cost of Rs. 7,87,696/- For the asst. yr. 1966-67, during which the electric furnace was installed, the assessee did not claim any development rebate not did it create any reserve on the ground that in that year the net result of the working of the company was a loss. The ITO actually determined a net loss of Rs. 71,536/- for the asst. yr. 1966-67, including unabsorbed depreciation of Rs. 29,036/. In the assessment for the year 1967-68,the assessee created a reserve of development rebate amounting to Rs. 2,13,152/- by debiting the profit and loss account. On the basis of the above reserve, the assessee claimed development rebate of Rs. 2,84,202/-. The ITO without discussing the claim of the assessee regarding the development rebate and without computing the amount of development rebate allowable to the assessee during the year under consideration rejected the claim of the assessee. In appeal before the AAC, the assessee again agitated this point, but it was again turned down by him. However, in second appeal before the ITAT, the assessee re-agitated the matter and the Tribunal accepted the same. The relevant observations in the order of the Tribunal are as under :

'We find from the records that the net result of the working of the Company during the asst. yrs. and 1967-68 and 1968-69 was a loss and under these circumstances it was not obligatory for the assessee to create any development rebate reserve ( : [1974]96ITR1(Bom) - Tata Iron & Steel Co. Ltd. v. N. C. Upadhaya & another). However, the assessee has created the requisite reserve by debiting the same to the profit and loss account. In our opinion, even if the assessee had not created any reserve during the years under consideration it was still entitled to the claim of development rebate in respect of the new machinery and plant installed or brought into use by it. OF course, the development rebate could be allowed only during the years in which the assessee earned profit and it was only in those years that the assessee-company was under a legal obligation to create development rebate reserve equal to 75% of the development rebate so claimed. At the same time the mere fact that the assessee created a reserve during the years under consideration when the assessed did not earn any profit would not disentitle the assessee to the claim of development rebate. This is obvious from the explanation to s. 34(3) which has been reproduced above.'

After hearing the learned counsel for the parties, we are of the opinion that the question of law as claimed by the revenue before the IT Tribunal did not arise as such of the order of the Tribunal.

However, as regards the scope of calling for a reference u/s 256(2) is concerned, both the learned counsel for the parties in support of their contentions, have relied upon a decision of the Supreme Court in CIT Bombay v. Scindia Steam Navigation Co. Ltd. The powers of this Court are wide enough to direct the Tribunal to refer any question of law to this Court for its opinion once such question arises or is deemed to arise from its order. In our opinion question of law, though somewhat different, does arise from the order.

Next it has also been brought to our notice that there is conflict of authorities on the interpretation of s. 34(3)(a) of the Act. Notwithstanding the conflict this Court has taken the view that the Act does not contemplate any time limit for claiming development rebate u/s 34 of the Act. (See CIT Punjab v. Sardar Singh Sachdeva followed in CIT, Patiala v. Rita Mechanical Works.) On the other hand the contrary view taken by the Gujarat High Court in cases reported as Addl. CIT, Gujarat v. Shri Subhlaxmi Mills Ltd. and Keshavlal Vithaldas v. CIT Gujarat has not been preferred. There is, however, no final adjudication on this point by the Supreme Court as yet, as stated by the counsel for the parties at the bar.

After going through the order of the ITAT, dated 26th August, we are of the opinion, as already observed, that in the circumstances stated above a question of law does arise from the order of the Tribunal. Of course, the questions claimed by the department before the Tribunal does not arise as such but, in our opinion, the following question of law does arise :

'Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the ITO to compute and allow the development rebate on a sum of Rs. 7,87,696/- for the asst. yr. 1967-68.'

For the reasons recorded above, we allow this petition and direct the IT Tribunal to refer the question of law, as formulated above, for the opinion of this Court. However, there will be no order as to costs.


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