COMMISSIONER OF INCOME TAX V. EIMCO ELECON (INDIA)LTD.

ITR/37/1995

AI Insights

The case involves the Commissioner of Income Tax as the applicant and EIMCO Elecon (India) Ltd. as the respondent. The core issues pertained to the interpretation and application of various sections of the Income-tax Act, 1961, concerning the deductibility of expenses and allowances related to repairs, maintenance, and investments in plant and machinery. The Tribunal's decisions on these matters were challenged, leading to the reference to the High Court. The High Court's judgment clarified the legal standings on these issues, referencing several precedents from the Supreme Court and other High Courts to arrive at its conclusions.

• Counselvise Citation: [2005] 140 COUNSELVISE.COM (IT) 676410 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 06-12-2005
• Assessment Year: misc
• Other Referred Cases: Britannia Industries Ltd. Vs. Commissioner of Income-tax & another, Commissioner of Income-tax Vs. P.J.Chemicals Ltd., Commissioner of Income-tax Vs. Tarun Commercial Mills Ltd., CIT Vs. Mohan Meakin Breweries Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Assessee Lawyers: B B NAIK
• Keywords: Depreciation; Income Tax; Investment allowance; Repairs and Maintenance; Spare parts; Subsidy; Internal Telephone Exchange
• Section: 31; 33; 256(1); 37(3A)

Judgement Text

"ITR/37/1995 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.37 of 1995 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA Sd/- HONOURABLE MS.JUSTICE H.N.DEVANI Sd/- ======================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ======================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus EIMCO ELECON (INDIA) LTD. - Respondent(s) ======================================================= Appearance : MR BB NAIK for Applicant(s) : 1, SERVED BY RPAD - (N) for Respondent(s) : 1, ======================================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 06/12/2005 ORAL JUDGMENT (Per : HONOURABLE MS.JUSTICE H.N.DEVANI) 1. The Income-tax Appellate Tribunal, Ahmedabad Bench 'B', has referred the following questions ITR/37/1995 2/5 JUDGMENT under Section 256(1) of the Income-tax Act, 1961 (the Act) at the instance of the Commissioner of Income-tax: R.A. No.771/Ahd/94.: “Whether, the appellate Tribunal is right in law and on facts in holding that the amount spent on purchase of spare parts is a part of repairs and maintenance of the cars, covered under section 31 and that the provisions of section 37(3A) are not attracted ?” R.A. No.772/Ahd/1994.: 1. Whether, the appellate Tribunal is right in law and on facts in directing the assessing officer to allow depreciation on the cost of building, investment allowance and depreciation on the cost of plant and machinery without deducting there from the amount of subsidy received by the assessee ? 2. Whether, the appellate Tribunal is right in law and on facts in allowing the assessee's claim for investment allowance of Rs.1,06,670/- spent on internal telephone exchange treating the same as office appliances ? 2. The Assessment Year is 1984-85 and the relevant accounting period is the year ended on 30th June, 1983. ITR/37/1995 3/5 JUDGMENT 3. Heard Mr.B.B.Naik, learned Standing Counsel on behalf of the applicant-revenue. Though served, there is no appearance on behalf of the respondent-assessee. 4. As regards the question referred in relation to Reference Application No.771/Ahd/1994, Mr.Naik has drawn attention to a decision of the Apex Court in the case of Britannia Industries Ltd. Vs. Commissioner of Income-tax & another, [2005] 278 ITR 546 (SC) to submit that the issue stands concluded in favour of the revenue. In the circumstances, it is not necessary to set out the facts and contentions in detail. 5. Applying the ratio of the aforesaid decision to the facts of the present case, it is held that the Tribunal was not justified in holding that the amount spent on purchase of spare parts is a part of repairs and maintenance of cars, covered under Section 31 and that the same does not attract the provisions of Section 37(3A) of the Act. ITR/37/1995 4/5 JUDGMENT 6. The question is, accordingly, answered in the negative i.e. in favour of the revenue and against the assessee. 7. In relation to question No.1 referred from Reference Application No.772/Ahd/1994, Mr.Naik has very fairly pointed out that the controversy in issue stands concluded in favour of the assessee by a decision of the Apex Court in the case of Commissioner of Income-tax Vs. P.J.Chemicals Ltd., [1994] 210 ITR 830 (SC). 8. Applying the ratio of the aforesaid decision to the facts of the present case, question No.1 is answered in the affirmative i.e. in favour of the assessee and against the revenue. 9. In relation to question No.2, Mr.Naik has drawn attention to a decision of this Court in case of Commissioner of Income-tax Vs. Tarun Commercial Mills Ltd., [1985] 151 ITR 75 (Guj.) wherein this Court has approved the view taken by the Himachal Pradesh High Court in the case of CIT Vs. Mohan ITR/37/1995 5/5 JUDGMENT Meakin Breweries Ltd., [1980] 122 ITR 203 wherein it has been held that internal telephone system installed by the assessee-company in their factories with 50 telephone lines was a “plant” and not an “office appliance” and as such was entitled to development rebate under Section 33 of the Act. 10. In the circumstances, following the aforesaid decisions it is held that the Tribunal was justified in allowing the assessee's claim for investment allowance of Rs.1,06,670/- spent on internal telephone exchange. The question is, accordingly, answered in the affirmative i.e. in favour of the assessee and against the Revenue. 11. The reference stands disposed of accordingly. There shall be no order as to costs. Sd/- [ D.A. MEHTA, J ] Sd/- [ H.N. DEVANI, J ] *** Bhavesh* "