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Commissioner of Income-tax Vs. Vinar (Pvt.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 196 of 1963
Judge
Reported in[1970]76ITR26(Cal)
ActsIncome Tax Act, 1922 - Section 10(2); ;Income Tax (Amendment) Act, 1953
AppellantCommissioner of Income-tax
RespondentVinar (Pvt.) Ltd.
Appellant AdvocateGouri Mitter and ;Dipak Sen, Advs.
Respondent AdvocateD. Pal and ;Jhunjhunwala, Advs.
Cases ReferredElectric Supply Corporation Ltd. v. Commissioner of Income
Excerpt:
- .....is referred as commencing from 1st april, 1949, and ending on 31st march 1959, covered financial year or assessment year. the second aspect of the matter is, to which period does this clause 'falling within the period' govern. so far as the first question is concerned, in the decision of the madras high court in the case of kumbakonam electric supply corporation ltd. v. commissioner of income-tax, [1963] 50 i.t.r. 809 it was held that the five-year limit prescribed for extra depreciation allowance under section 10(2)(via) of the indian income-tax act, 1922, in respect of buildings erected after march 31,1948, expired on march 31, 1959, and extra depreciation cannot therefore be claimed for the assessment year 1959-60. the words 'financial years' in section 10(2)(via) refer to.....
Judgment:

Sabyasachi Mukharji, J.

1. The assessment out-of which this referencearises is m respect of the assessment year 1959-60; the relevant previous year ended on the 31st March, 1959. The assessee is a company. The assessee had purchased certain plant and machinery of the value of Rs. 2,23,257 between 15th November, 1955, and 1st July, 1958. After setting off the price of the machinery sold during the relevant previous year, the assessee claimed both normal and additional depreciation on Rs. 2,10,445 for the assessment year in question. The Income-tax Officer allowed normal depreciation under the provisions of Section 10(2)(vi) of the Indian Income-tax Act, 1922, but he disallowed the assessor's claim for additional depreciation under Section 10(2)(via) of the Act amounting to Rs. 29,618. There was an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that, according to Section 10(2)(via) of the Indian Income-tax Act, 1922, the additional depreciation was allowable upto and including the assessment year 1958-59. There was a further appeal before theTribunal. The Tribunal was of the opinion that there was certain amount of ambiguity in the section and held that it should be construed in favour of the taxpayer and as such allowed the claim for additional depreciation in respect of the same year.

2. On an application being made under Section 66(1) of the Indian Income-tax Act, 1922, the following question has been referred to this court:

'Whether, on a true interpretation of the provisions of Section 10(2)(via) of the Indian Income-tax Act, 1922, as amended by the Indian Income-tax (Amendment) Act, 1953 (Act XXV of 1953), the assessee was entitled to an allowance of additional depreciation for the assessment year 1959-60?'

3. Sub-section (via) to Section 10(2) of the Indian Income-tax Act, 1922, was introduced by Section 11 of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949. The sub-section, as it originally stood, provided as follows, so far as is material for the purpose of this reference after leaving out the proviso :--

'(via) in respect of depreciation of buildings newly erected, or of machinery or plant being new which has been installed, after the 31st day of March, 1948, a further sum (which shall be deductible in determining the written down value) equal to the amount admissible under Clause (vi) (exclusive of the extra allowance for double or multiple shift working of the machinery or plant and the initial depreciation allowance admissible under that clause for the first year of erection of the building or the installation of the machinery or plant) in the assessments for 'each of the five years, commencing on the 1st day of April, 1949, and ending with the 31st day of March, 1954.'

4. The said clause was amended by the Income-tax (Amendment) Act, 1953, which received the assent of the President on the 24th May, 1953. The said clause was amended by substituting words 'in the assessments for each of the five years commencing on the 1st day of April, 1949, and ending with the 31st day of March, 1954' with the words 'in not more than five successive assessments for the financial years next following the previous year in which such buildings are erected and such machinery and plant installed and falling within the period commencing on the 1st day of April, 1949, and ending on the 31st day of March, 1959.' The question that arises is whether, in the facts and circumstances of this case, the assessee would be entitled to exemption in view of the provision of the last part of the said clause.

5. The main point that requires consideration is which is the period that is governed by the expression 'falling within the period'. It has to be borne in mind that a provision like this in a fiscal statute must be strictly construed. Section 10(2)(via) of the Indian Income-tax Act, 1922,confers a relief to the assessee and should, therefore, be strictly construed. The assessee must establish that its case falls within the terms of that clause. Reading the clause as amended it is clear that there are three different conditions to be fulfilled in order to be entitled to additional depreciation and they are--(1) the subject-matter, being building plant and machinery, should have been installed after 31st March, 1948 ; (2) the benefit of depreciation allowed would enure for five successive assessments for the financial years following the previous year in which it was erected or installed; and (3) the period of five years shall fall within the assessment years covering the assessment for the period not later than 31st March 1959.

6. Two aspects of the argument require consideration. One is whether the period that is referred as commencing from 1st April, 1949, and ending on 31st March 1959, covered financial year or assessment year. The second aspect of the matter is, to which period does this clause 'falling within the period' govern. So far as the first question is concerned, in the decision of the Madras High Court in the case of Kumbakonam Electric Supply Corporation Ltd. v. Commissioner of Income-tax, [1963] 50 I.T.R. 809 it was held that the five-year limit prescribed for extra depreciation allowance under Section 10(2)(via) of the Indian Income-tax Act, 1922, in respect of buildings erected after March 31,1948, expired on March 31, 1959, and extra depreciation cannot therefore be claimed for the assessment year 1959-60. The words 'financial years' in Section 10(2)(via) refer to assessment years. Reading the clause of the section it is manifest that what was intended was that in respect of the plant and machinery installed after 31st March, 1948, for five successive assessments for the years following the previous year in which the buildings are erected and machinery installed the assessee would get additional depreciation provided however the same assessment years fall within the period 1st April,1949, and 31st March, 1959. In view of the matter that depreciations have been allowed for five successive assessments, it is clear that the financial years referred to in Section 10(2)(via) must mean the assessment years and the period commencing from 1st April, 1949, and ending on 31st March, 1959, was referable to the assessment years. It is also clear that the expression 'falling within the period' governs the assessment years and not the period of installation. It was urged that, inasmuch as some relief was being sought to be given, the expression 'falling within' governs the period of the installation of the plant and machinery and does not govern the period of the assessment years for which exemption is being granted. Bearing the scheme of the section in mind we are unable to accept this contention. The view we are taking is in consonance with the view expressed by the Madras High Court in the decisions of Veerappa Transports v. Commissioner ofIncome-tax and Kumbakonam, [1963] 50 I.T.R 442. Electric Supply Corporation Ltd. v. Commissioner of Income-tax. The other decision referred to by Dr. Pal, which is aBench decision of this court in the case of Commissioner of Income-tax v.Netherlands Steam Navigation Co. Ltd., [1965] 53 I.T.R. 774 did not really deal with thequestion before us.

7. In that view of the matter we are of the opinion that the decision of the Tribunal was wrong and the question must be answered in the negative and against the assessee. The assessee will pay the costs of this reference.

Deb, J.

8. I agree.


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