The Commissioner of Incometax, V. Singh Pultry Private Limited,

ITC/15/2001

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The case revolves around the assessment of income tax for the year 1988-89 under Section 115-J of the Income Tax Act, 1961. The Income Tax Officer assessed the tax based on the provisions of the law and the book profits, leading to a dispute over the classification of poultry sheds as 'Plant' for depreciation purposes. The Tribunal's decision, which favored the assessee, was challenged by the Department, leading to a reference under Section 256(2) of the Act. The High Court, referencing a Supreme Court decision, upheld the Tribunal's decision without requiring a mandamus for the Tribunal to refer the questions.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 742177 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 16-07-2014
• Assessment Year: misc
• Other Referred Cases: State of Orissa v. Mahabir Prasad Agrawalla, Commissioner of Income-Tax v. Maharishi Ved Vigyan Vishwa Vidya Peetham, Commissioner of Income-Tax v. Munak Engineers (P.) Ltd., Apollo Tyres Limited v. Commissioner of Income-Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment year 1988-89; Book Profits; Depreciation; Income Tax; Plant; Poultry Sheds
• Section: 256(2); 115-J

Judgement Text

" THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.C.No.15 of 2001 JUDGMENT: (Per the Hon’ble Sri Justice L.Narasimha Reddy) This reference under Section 256(2) of the Income Tax Act, 1961 (for short ‘the Act’) is made at the instance of the Revenue. The respondent is an assessee under the Act. For the assessment year 1988-89, it submitted the returns. At the relevant point of time, Section 115-J of the Act, was in force. The purport thereof is that, in case the income and the tax payable thereon arrived at by applying the relevant provisions of law is less than the one that can be levied on the book profits, the Department will be entitled to collect the tax whichever is more. In the case of the respondent, the Income Tax Officer (ITO) passed an order of assessment, dated 27.03.1991, taking the view that the tax payable on application of the relevant provisions of law would be Rs.30,94,384/- and the one payable on adopting the procedure prescribed under Section 115-J of the Act would be Rs.13,36,720/-. The respondent filed an appeal on certain other aspects. In the appeal, the Commissioner of Income Tax (Appeals) granted some relief. Thereupon, the Department filed I.T.A.No.1724/Hyd/1992. The appeal was dismissed by the Tribunal, through order, dated 20.05.1996. R.A.No.549 of 1996 was filed with a request to refer the following questions for answer by this Court: 1. “Whether on the facts and in the circumstances of the case, the ITAT was correct in law, in treating the poultry sheds as ‘Plant’ for the purpose of allowance of depreciation? 2. Whether on the facts and in the circumstances of the case, the ITAT’s decision that arrears of depreciation worked out by changing the method of computation of depreciation in the current year is charge on the profits earned during the year, was reasonable and not perverse? 3. Whether on the facts and in the circumstances of the case, the ITAT was correct in law in allowing arrears of depreciation of Rs.17,07,655/- for the purpose of determining profits under Section 115-J?” Through its order, dated 24.11.1997, the Tribunal declined to accede to the request of the Department. Hence, this reference is sought by the Department under Section 256(2) of the Act, with a prayer to frame the following question and direct the Tribunal to refer to it, for being answer: “Whether on the facts and in the circumstances of the case, the ITAT was correct in law, in treating the poultry sheds as ‘Plant’ for the purpose of allowance of depreciation?” Heard Sri J.V.Prasad, learned counsel for the Department, and Sri Y.Ratnakar, learned counsel for the respondent/assessee. Before we proceed to deal with the questions on merits, a basic issue arose for consideration, namely “whether the consideration of the matter must be confined to the one of requiring the Tribunal to send the questions on being sent or whether this Court can address them straightaway?” In the ordinary course of things, in case the Court is satisfied that the questions need to be referred to or examined by it, a mandamus must be issued, requiring the Tribunal to refer the questions through a reasoned order, expressing its satisfaction, though prima facie. Where, however, the facts are clear and the matter is covered by an authoritative pronouncement, the necessity to require the Tribunal to send the questions by issuing a mandamus, may not arise. Reference in this context may be made to the judgments in State of Orissa v. Mahabir Prasad Agrawalla[1], Commissioner of Income-Tax v. Maharishi Ved Vigyan Vishwa Vidya Peetham[2] and Commissioner of Income- Tax v. Munak Engineers (P.) Ltd.[3] The respective High Courts have expressed the view that if the facts on record are not in dispute and they are adequate to discuss the questions, framed in the R.C., they can be answered without the necessity of requiring the Tribunal to send those questions for being answered. The second situation under which the questions can be answered straight away is, where they are covered by any authoritative pronouncement. In the instant case, basically the questions are academic in nature. The reason is that the controversy would have arisen, if only the computation on the basis of procedure prescribed under Section 115-J of the Act has resulted in a higher incidence of tax than the one compared to the assessment by applying the relevant provisions of law. In this case, as observed earlier, normally the assessment made by the application of the provisions of law has resulted in the levy of tax of Rs.30,94,384/-. In contrast, the assessment made on the basis of Section 115-J of the Act resulted in levy of tax of Rs.13,36,720/-. The Department has the option to choose the larger figure. In such an event, the reference of those questions was almost academic. Even on merits, the matter is covered in favour of the assessee, in view of the judgment of the Supreme Court in Apollo Tyres Limited v. Commissioner of Income-Tax[4]. We, therefore, answer the questions in favour of the respondent and against the Revenue. ____________________ L.NARASIMHA REDDY, J. _____________________ CHALLA KODANDA RAM, J. Date:16.07.2014 GJ THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.C.No.15 of 2001 ORDER: (Per CKR,J) While I am in agreement with the decision in the present case, with respect to the fact that the questions are covered by the judgment of the Supreme Court in Apollo Tyres Limited v. Commissioner of Income-Tax[5], I do not subscribe to the opinion expressed by the Hon’ble Sri Justice L.Narasimha Reddy with respect to the aspect that when questions are coming up before the Court under Section 256(2) of the Income Tax Act, the questions can be directly answered on merits. Inasmuch as there is no elaborate discussion on this aspect before us, I reserve to deal with the said aspect in appropriate case, where the question really falls for consideration. _____________________ CHALLA KODANDA RAM, J. Date:16.07.2014 GJ [1] [1990] 079 STC 0163 [2] [1998] 232 ITR 0170 [3] [2004] 271 ITR 0361 [4] [2002] 255 ITR 273 [5] [2002] 255 ITR 273 "