2015 (4) TMI 228 - HC - Income Tax

Appeal partially successful: Revenue wins on car value, assessee on income exclusion & investment. No costs awarded.

The appeal was partially successful, with the court ruling in favor of the revenue on issues regarding the perquisite value of motor car disallowance and ... Ascertaining the perquisite value on account of motor car - Tribunal directing AO to compute disallowance as per Rule 3 - Held that:- Mrs.Vasanti Patel appearing on behalf of the assessee that there is judgment in the field, namely, of the Commissioner of Income Tax Vs. British Bank of Middle East (2001 (8) TMI 12 - SUPREME Court) directly on the point. Since that covers the issue or question against the assessee and in favour of the revenue, we hold accordingly. - Decided in favour of revenue. Exclude from the profits and gains items of other income while working out the deduction under section 80-I as directed by Tribunal - Held that:- In the circumstances, for relevant assessment year, namely, 1987-1988 with which we are concerned, if the benefit was granted by the tribunal relying on the Assessing Officer's order but eventually what it has held is that though the amounts are termed 'miscellaneous income', 'other income' are derived from two industrial units situated at Ambernath and Kumbari. The same has nexus with the industrial activity of the assessee. In the circumstances the Assessing Officer was directed to consider these items under the head 'Other income' and not exclude them for the purpose of deduction under section 80-I of the Income Tax Act. Thus, we are concerned for the year 1987-1988 but the ground in the present memo of appeal is framed in such a manner that it is difficult to ascertain whether the revenue is really aggrieved by what is done by the Assessing Officer for the year 1986-1987 or that the Assessing Officer will have to follow the direction in paragraph 11 of the order of the tribunal. We are of the opinion, that once the Assessing Officer has worked out details on the basis of items disclosed in the Profit and Loss account, then the directions given to him and issued in terms of paragraph 11 of the tribunal's order do not raise any substantial question of law. Expenditure incurred by the assessee is not in the nature of advertisement and no disallowance under Rule 6B can be made as directed by Tribunal - Held that:- We are of the view that the tribunal has followed the judgment of this Court in the case of the Commissioner of Income Tax Vs. Allana and Sons reported in (1993 (4) TMI 13 - BOMBAY High Court). If that is how the matter has been approached and equally the tribunal found that the facts and circumstances in case of Allana and Sons, are identical to the assessee before us then even this question cannot be answered, otherwise but in favour of the assessee. Relying on the judgment, this is not substantial question of law at all because the answer to it has been given by this Court in the judgment reported prior to the impugned order. Hence, the said question will have to be answered in favour of the assessee. Premium of group Insurance policy not be considered as salary or perquisite for disallowance under Section 40A (5) - Held that:- As far as disallowance and which has been made pertaining to the premium to group insurance policy, the tribunal held that the premium of group insurance should not be considered as salary or perquisites for disallowance under section 40A (5) of the Income Tax Act is the conclusion reached by the Commissioner (Appeals). However, this point or question has been repeatedly raised but stands covered against the revenue and in favour of the assessee. Production incentives - Held that:- The tribunal held that once the revenue could not establish that the nature of production of incentive payments for the assessment year 1987-88 are different from earlier years, then, the tribunal's view for earlier assessment year on facts would bind the revenue. We do not know how such view can give rise to any substantial question of law. Decided in favour of the assessee Exgratia payments made to retiring employees - deletion of addition by tribunal - Held that:- Tribunal has upheld the Commissioner's view. In doing that the tribunal has referred, in the impugned order to its findings in its order and pertaining to the same assessee for the assessment year 1982-83. That would bind the revenue. There are series of orders but the tribunal for the sake of reference points out its order for the assessment year 1982-83. In the circumstances, we are of the view that there being no distinction on facts and the tribunal's consistent view being not questioned successfully because the departmental application for reference was rejected by the tribunal itself, then this question is also not substantial question of law. In any event, the authoritative pronouncement by the Division Bench of this Court in the decision brought to our notice, namely, the Commissioner of Income Tax Vs. Maina Ore Transport (P) Ltd. (2008 (8) TMI 504 - BOMBAY HIGH COURT ) answers the question in favour of the assessee. Include depreciation on guest house while computing the disallowance under section 37 (4) - Held that:- It is fairly conceded by Ms.Patel that the decision of the Hon'ble Supreme Court in the case of Britania Industries Ltd. Vs. the Commissioner of Income Tax (2005 (10) TMI 30 - SUPREME Court) answers it against the assessee and in favour of the revenue. Investment allowance under section 32A in respect of the 10 items though the same were not used directly for manufacturing activities - Held that:- Once again it has been brought to our notice that in the assessee's own case pertaining to disallowance, namely, Investment allowance under section 32A, the tribunal has passed the order in years 1979- 80, 1980-81, 1982-83 and 1983-84. In the first assessment year 1979-80 the department sought to make reference of a question of law to this Court but that application was rejected by the Income Tax Appellate Tribunal. Thereafter for the assessment year 1981- 82 the department application to seek reference of the identical question was dismissed by the Income Tax Appellate Tribunal. We find that for some years the department endeavored to make an application and sought reference of the question of law to this Court for its opinion. However, for some years it did not make such attempt. In the circumstances, the tribunal was justified in concluding that the view taken by it earlier and pertaining to this assessee continues to bind the revenue. In any event, there is judgment of this Court in the field namely, Associated Bearing Co. Ltd. Vs. the Commissioner of Income Tax (2005 (10) TMI 75 - BOMBAY High Court ). That makes a reference to all prior decisions of this Court. Having perused them we do not find that the findings of tribunal can be termed as perverse or vitiated by a error of law apparent on the face of record. This question is answered in favour of the assessee and against the revenue. Allowing higher rate of Investment Allowance of 35% on machineries installed for the purpose of manufacturing Sulphuric Acid by tribunal - Held that:- As far as last question is concerned, we do not find how it is framed for it does not arise from any of the tribunal's findings or grounds However, we do not find any reference being made to higher rate of investment allowance of 35% on machinery installed for the purpose of manufacturing Sulphuric Acid. This question, therefore, could not have arisen and from paragraph 32 of the tribunal's order as well. We cannot conclude that such question can be termed as substantial question of law. From the order passed by the Commissioner, we could not discern that any such reference and particularly to the product has been made. In the circumstances, we do not think that question no.9 can be termed as substantial question of law. Issues Involved:1. Perquisite value of motor car disallowance computation under Rule 3.2. Exclusion of other income items while computing deduction under Section 80-I.3. Nature of expenditure and disallowance under Rule 6B.4. Group insurance policy premium as salary or perquisite under Section 40A(5).5. Allowance of production incentives claim.6. Addition on account of ex-gratia payments to retiring employees.7. Depreciation on guest house under Section 37(4).8. Investment allowance under Section 32A for non-manufacturing items.9. Higher rate of investment allowance for machinery used in manufacturing Sulphuric Acid.Detailed Analysis:Issue 1: Perquisite Value of Motor Car DisallowanceThe Tribunal directed the Assessing Officer to compute disallowance as per Rule 3 for ascertaining the perquisite value of the motor car. The Court held that the issue is covered by the Supreme Court judgment in Commissioner of Income Tax Vs. British Bank of Middle East (2001) 251 ITR 217, which is against the assessee and in favor of the revenue.Issue 2: Exclusion of Other Income Items for Section 80-I DeductionThe Tribunal's order and the Commissioner's order pertained to whether items of other income should be excluded while computing deduction under Section 80-I. The Court noted that the Tribunal found that the items termed as 'miscellaneous income' and 'other income' were derived from the industrial units and had a nexus with the industrial activity. Therefore, the Tribunal directed the Assessing Officer to consider these items under 'Other income' for deduction purposes. The Court concluded that there was no substantial question of law raised by the revenue.Issue 3: Nature of Expenditure and Disallowance under Rule 6BThe Tribunal followed the judgment of the Bombay High Court in Commissioner of Income Tax Vs. Allana and Sons (1995) 216 ITR 690, which found that the facts and circumstances were identical to the present case. Therefore, the Tribunal's decision was upheld, and the question was answered in favor of the assessee.Issue 4: Group Insurance Policy Premium under Section 40A(5)The Tribunal held that the premium of the group insurance policy should not be considered as salary or perquisite for disallowance under Section 40A(5). This conclusion was based on consistent earlier decisions of the Tribunal in the case of the same assessee. Hence, the Court found no substantial question of law.Issue 5: Production Incentives ClaimThe Tribunal referred to its observations for the earlier assessment years 1982-83 and 1983-84, where the nature of production incentive payments was established. The Court noted that the Tribunal's consistent view on facts would bind the revenue, and there was no substantial question of law.Issue 6: Ex-Gratia Payments to Retiring EmployeesThe Tribunal upheld the Commissioner's view on the deletion of addition made on account of ex-gratia payments to retiring employees. The Tribunal's consistent view for the same assessee in earlier years was binding, and the Court found no substantial question of law.Issue 7: Depreciation on Guest House under Section 37(4)The Court noted that the decision of the Supreme Court in Britania Industries Ltd. Vs. Commissioner of Income Tax (2005) 278 ITR 546 answered this issue against the assessee and in favor of the revenue.Issue 8: Investment Allowance under Section 32A for Non-Manufacturing ItemsThe Tribunal had consistently allowed the investment allowance under Section 32A for the assessee in earlier years, and the department's attempts to seek reference were dismissed. The Court also referred to judgments including Associated Bearing Co. Ltd. Vs. Commissioner of Income Tax (2006) 286 ITR 341, and found no error in the Tribunal's findings. Thus, the question was answered in favor of the assessee.Issue 9: Higher Rate of Investment Allowance for MachineryThe Court found that this issue did not arise from any findings or grounds of the Tribunal's order. There was no reference to the product or machinery for manufacturing Sulphuric Acid in the Tribunal's or Commissioner's order. Therefore, the Court concluded that this did not constitute a substantial question of law.Conclusion:The appeal succeeded in part. Questions 1 and 7 were answered in favor of the revenue, while all other questions were answered in favor of the assessee. There was no order as to costs.