COMMISSIONER OF INCOME TAX V. L.M.S FOUNDRIES PVT LTD.

ITR/387/1984

AI Insights

The case revolves around the entitlement of L.M.S Foundries Pvt Ltd to investment allowance and depreciation on new machinery and plant purchased during the assessment year 1979-80, without deducting the government subsidy received. Initially, the Income Tax Officer allowed the claims but deducted 15% of the machinery cost due to the subsidy. However, the Commissioner of Income-tax (Appeals) and subsequently the Tribunal, favored the assessee's claim for full allowance and depreciation. The Revenue's appeal to the High Court was based on a similar case precedent from the Special Bench of the Tribunal at Madras, but the court found alignment with the Supreme Court's decision in Commissioner of Income-tax v. P.J. Chemicals Limited, which supported the assessee's stance.

• Counselvise Citation: [2000] 140 COUNSELVISE.COM (IT) 677597 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 19-01-2000
• Assessment Year: misc
• Other Referred Cases: Pioneer Match Works v. ITO, Commissioner of Income-tax v. P.J. Chemicals Limited, CIT v. Grace Papers Industries Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: B B NAIK; MANISH BHATT
• Keywords: Commissioner of Income Tax (Appeals); Depreciation; Income tax appellate tribunal; Investment allowance; Machinery; Subsidy; Special Bench of the Tribunal at Madras
• Section: 32A

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 387 of 1984 For Approval and Signature: Hon'ble MR.JUSTICE J.N.BHATT and MR.JUSTICE C.K.BUCH ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus L.M.S FOUNDRIES PVT LTD. -------------------------------------------------------------- Appearance: MR BB NAIK WITH MR MANISH R BHATT for Petitioner SERVED BY RPAD - (N) for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE J.N.BHATT and MR.JUSTICE C.K.BUCH Date of decision: 19/01/2000 ORAL JUDGEMENT (Per J.N.Bhatt, J.) The Income Tax Appellate Tribunal, Ahmedabad, Bench 'A' has referred the following question for the our opinion, has referred the following question for our opinion, hereinbelow: \"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to investment allowance u/s.32A of the Income-tax Act, 1961 and depreciation on entire cost of the machinery without deducting therefrom the amount of subsidy received from the Government ?\" The assessee was a private limited company and in course of the assessment year 1979-80, it claimed investment allowance u/s.32A of the Income Tax Act. Upon value of the new machinery and plant purchased during the relevant year, the assessee claimed investment allowance on the gross income without deducting the amount of subsidy, which, it was entitled to receive from the Government. The Income Tax Officer concerned, no doubt, allowed the investment allowance and depreciation after deducting 15 per cent of the cost of such machineries on account of subsidy receivable from the Government. The Commissioner of Income-tax (Appeals) upon an appeal by the assessee held that the assessee was entitled for investment allowance and depreciation on entire machinery without deducting the amount of subsidy received from the Government. Again, on an appeal before the Tribunal by the Revenue after relying on the order of the Special Bench of the Tribunal at Madras, on an identical issue in the case of Pioneer Match Works v. ITO , upheld the order of the Commissioner of Income Tax (Appeals). That is how the aforesaid question has been referred to us for our opinion at the instance of the Revenue. Learned counsel appearing for the Revenue, candidly, at the outset, drew our attention to a decision of the Hon'ble Supreme Court in the case of Commissioner of Income-tax v. P.J.Chemicals Limited, 210 ITR 230, wherein, identical question pertaining to the amount of subsidy has been decided and in that decision, the view of this Court in CIT v. Grace Papers Industries Pvt. Ltd., 183 ITR 591 came to be approved. Obviously, therefore, the question which has been referred to us is squarely covered by the aforesaid decision. In the result, our answer to the aforesaid question is in the affirmative, against the revenue and in favour of the assessee. The reference stands disposed of accordingly without any order as to costs. ....... (vjn) "