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Commissioner of Income-tax Vs. General Fibre Dealers (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 70 of 1994
Judge
Reported in[2001]248ITR622(Cal)
ActsIncome-tax Act, 1961 - Sections 32, 32A, 35C, 37, 144 and 256(1); ;Income-tax Rules, 1962 - Rule 5
AppellantCommissioner of Income-tax
RespondentGeneral Fibre Dealers (P.) Ltd.
Respondent AdvocateKhaitan, Adv.
Excerpt:
- .....whether, on the facts and in the circumstances of the case, the tribunal was justified in allowing extra shift allowance on building and furniture as per section 32 read with rule 5 of the income-tax rules, 1962 ?3. whether, on the facts and in the circumstances of the case, the tribunal was justified in holding that the assessee was entitled to relief under section 35c of the income-tax act, 1961 ?'2. the assessee has filed its return on november 20, 1978, showing the total income of rs. 2,62,601. the assessment was completed under section 144 on january 31, 1981. that was cancelled and in fresh assessment, the assessee was asked to explain why a sum of rs. 5,00,640 should not be added in the total income of the assessee. the income-tax officer further noticed that the assessee has.....
Judgment:

Y.R. Meena J.

1. On an application under Section 256(1} of the Income-tax Act, 1961, the Tribunal has referred the following questions set out in paragraph 6 at page 6 of the statement of case for our opinion :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing investment allowance on jeeps and motor cycles owned by the assessee under Section 32A of the Income-tax Act, 1961 ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing extra shift allowance on building and furniture as per Section 32 read with rule 5 of the Income-tax Rules, 1962 ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to relief under Section 35C of the Income-tax Act, 1961 ?'

2. The assessee has filed its return on November 20, 1978, showing the total income of Rs. 2,62,601. The assessment was completed under Section 144 on January 31, 1981. That was cancelled and in fresh assessment, the assessee was asked to explain why a sum of Rs. 5,00,640 should not be added in the total income of the assessee. The Income-tax Officer further noticed that the assessee has claimed investment allowance on jeeps and motor cycles under Section 32A of the Income-tax Act, 1961, and extra shift allowance on building and furniture as per Section 32 read with rule 5 of the Income-tax Rules, 1962. He disallowed both and also disallowed the claim of the assessee that the assessee is entitled for any relief under Section 35C of the Income-tax Act, 1961.

3. In appeal before the Commissioner of Income-tax (Appeals), following the decision of this court in Ramnugger Cane and Sugar Co. Ltd. v. CIT : [1981]128ITR716(Cal) , the view taken by the Income-tax Officer was confirmed so far as the claim under Section 35C of the Act is concerned. He allowed the investment allowance on the ground that the Income-tax Officer himself has allowed investment allowance on jeeps and motor cycles in the assessment year 1979-80. But it appears that the Commissioner of Income-tax (Appeals) has not considered the dispute regarding extra shift allowance on building and furniture as per Section 32 read with rule 5 of the Income-tax Rules, 1962.

4. In appeal before the Tribunal, the Tribunal has considered the claim of the assessee whether the assessee is entitled for investment allowance on jeeps and motor cycles used in the tea garden. In paragraph 6, the Tribunal has concluded its judgment holding that jeeps and motor cycles are required to use in supervising and inter-departmental and inter-sectional management of the tea estate and, therefore, are entitled for investment allowance under Section 32A of the Act.

5. The Tribunal has further considered the ground relating to extra shift allowance in respect of buildings and furniture used in the concern of the assessee in paras. 12. 13 and 14. The Tribunal has taken the view that as the normal allowance is equal to extra shift allowance then why the normal allowance should not be allowed. The extra shift allowance also falls within the definition of normal allowance. Therefore, the assessee is entitled for extra shift allowance, depreciation on building and furniture.

6. The issue raised in question No. 3, the Tribunal has considered it in its judgment in paras. 17 to 22 and the Tribunal has concluded its view holding that the agriculture development works in the representative capacity of cultivating the land and more area was brought under cultivation of tea gardens, the assessee is entitled for deduction under Section 35C of the Income-tax Act.

7. Heard learned counsel for the parties. The provisions of Section 32A of the Act requires that the assessee is entitled for investment allowance, inter alia, on the machinery or plant specified in Sub-section (2) which is owned by the assessee and is wholly used for the purpose of business carried on by him. The jeep and motor cycle by no stretch of imagination can be treated as machinery and plant. They are vehicles which can be used inside or outside the garden. When motor jeeps and motor cycles are not machinery or plant, referred to in Section 32A, they are not entitled for the investment allowance.

8. The assessee also claimed extra shift allowance on depreciation under Section 32 of the Act read with rule 5 of the Income-tax Rules. What should be the rate of depreciation and whether any plant or machinery or building is entitled for extra shift allowance Appendix I under rule 5 of the Income-tax Rules, 1962, has specified the rates of depreciation for buildings, furniture and fittings, machinery and plant. These are the three heads. The assessee has claimed an extra shift allowance on depreciation on building and furniture. For building and furniture which is under the heads 1 and 2 in Appendix I, Part I, there is no provision for extra shift allowance to a building or furniture and fitting. Though there are different rates of depreciation in the case of buildings, i.e., 5 per cent, in case of general buildings and special rates for factory buildings, i.e., the rate of depreciation is 10 per cent, and in the case of purely temporary erection such as wooden structures the rate of depreciation is 100 per cent. When no extra shift allowance to depreciation is provided for the building or furniture, the Tribunal has erred in concluding that the building and furniture in the case of this assessee is entitled for extra shift allowance.

9. Now we come to the question whether the assessee is entitled for deduction under Section 35C of the Act. Learned counsel for the Revenue has placed reliance on the decision of this court in the case of Ramnugger Cane and Sugar Co. Ltd. : [1981]128ITR716(Cal) and in the case of CIT v. Nava-bharat Enterprises (P.) Ltd. : [1987]165ITR603(AP) .

10. Learned counsel for the assessee, Mr. Khaitan, submits that the benefits and services are extended to the cultivators and growers. Therefore, the assessee is entitled for deduction under Section 35C of the Act.

11. In Ramnugger Cane and Sugar Co. Ltd.'s case : [1981]128ITR716(Cal) , this court has taken the view that the company growing sugar cane, manufacturing sugar and selling the same, expenditure incurred by the company for providing seeds, manure, etc., to its own sugar farm as the services and goods or facilities are not extended to the person distinct from the company the word 'person' occurring in Section 35C does not include the company itself which provides the goods or facilities to itself. The same view has been taken by the Andhra Pradesh High Court in CIT v. Nava-bharat Enterprises (P.) Ltd. : [1987]165ITR603(AP) . Whether the deduction can be allowed under Section 35C in a case where the company is spending the amount for development and extended that facility in cultivation for its own land, the Andhra Pradesh High Court has the same view that the company is not entitled for deduction under Section 55C which is reported in CIT v. Navabharat Enterprises (P.) Ltd. : [1987]165ITR603(AP) , it has observed as under :

'It would be evident from the above analysis that if any amount is spent by the assessee for developing his/its own land, or for improving seeds or providing modern or better techniques for its own purposes, deduction cannot be allowed, because the section contemplates goods, services or facilities being provided to another person, and not by the assessee to himself/itself. It may, however, happen that though the agricultural operations are carried on, on its own land, yet the land may be used for providing better seeds to other agriculturists, or for dissemination of information to them, or the land may be used as a demonstration farm for application of modern techniques or methods of agriculture, etc., for the benefit of other agriculturists engaged in raising tobacco. In such a case, deduction would be permissible. If deduction is granted under this provision, deduction under any other provision of the Act, including Section 37, cannot be granted either for the same assessment year, or for any other assessment year. The Income-tax Officer to whom the matter has been remanded by the Tribunal shall look into the facts and circumstances of this case in the light of the above analysis of the section and pass orders according to law.'

12. The admitted facts are that the assessee has provided the goods and extended the facilities for agricultural produce in its own farm. When the facilities and goods are provided for agricultural produce in the assessee's own farm and for the benefit of the assessee and not extended these facilities to the third person, i.e., a person distinct from the assessee-company, the assessee, is not entitled for deduction under Section 35C also.

13. In the result, we answer all these questions in the negative, i.e., in favour of the Revenue and against the assessee.

14. The reference application is thus disposed of.


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