Bombay H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the entire amount of initial contribution to superannuation fund should be allowed instead of 1/5th of 80 per cent thereof?

High Court Of Bombay

CIT vs. Mahindra Ugine & Steel Co. Ltd.

Sections 35D, 36(1)(iv), 37(1), 37(3B)

Asst. Year 1985-86

S.H. Kapadia & R.M.S. Khandeparkar, JJ.

IT Appeal No. 294 of 2000

19th June, 2000

Counsel Appeared

R.V. Desai with J.P. Deodhar, for the Appellant : A.P. Sathe, for the Respondent

JUDGMENT

BY THE COURT :

Three questions have been raised in the above appeal for the asst. yr. 1985-86. Question No. 1 is as follows :

“(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the entire amount of initial contribution to superannuation fund should be allowed instead of 1/5th of 80 per cent thereof?”

Learned counsel for the Department concedes that the above question has been answered in favour of the assessee and against the Department in CIT vs. Sirpur Paper Mills (1999) 153 CTR (SC) 89 : (1999) 237 ITR 41 (SC). Hence, question No. (i) is answered in the affirmative and in favour of the assessee.

The second question referred to this Court in the appeal is as follows : “(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the stamp duty paid on debenture issue amounting to Rs. 9,40,808 is an allowable deduction under s. 35D of the IT Act?” Question No. (ii), quoted above, has not been framed properly. It needs to be reframed. The reframed question is as follows : “Whether the stamp duty paid on debenture issue continues to be an item of deduction under s. 37 of the IT Act, even after the enactment of s. 35D of the IT Act ?”

Mr. Desai, learned senior counsel for the Department, contended that in this case, the judgment of the Supreme Court in India Cements Ltd. vs. CIT (1966) 60 ITR 52 (SC) : TC 17R.649, has no application after the introduction of s. 35D of the IT Act. He contended that the Tribunal erred in coming to the conclusion that s. 35D would only apply in respect of the expenditure which is otherwise not allowable under the Act. He contended that the Tribunal erred in coming to the conclusion that s. 35D would apply only in respect of the capital expenditure which is not otherwise allowable as a deduction. He contended that, in this case, the expenditure in connection with debenture issue had been incurred after the commencement of the business as contemplated by s. 35D(1)(ii) and, therefore, the said expenditure cannot be considered as a revenue expenditure.

We do not find any merit in the above contention. Sec. 35D deals with amortisation of certain preliminary expenses. Under s. 35D(1)(ii), it is laid down that after the commencement of the business any expenditure as described in s. 35D(2), which is incurred in connection with the extension of the industrial undertaking or with regard to setting up a new industrial unit then the assessee shall be allowed a deduction at an amount equal to one- tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or the previous year in which expansion of the industrial undertaking is completed, etc.

In the present case, on the facts, the Tribunal had found that the object of the debenture issue was to meet the working capital requirement of the assessee and, therefore, the expenditure was considered to be a revenue expenditure. In view of the said finding of fact recorded by the Tribunal, the judgment of the Supreme Court in India Cements Ltd. vs. CIT (supra),would squarely apply. We do not see any reason to interfere with the impugned order. Accordingly, the above reframed question is answered in the affirmative, i.e., in favour of the assessee and against the Department.

The third question which has been raised in this memo of appeal is as follows : “(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the conveyance allowance paid to employees not owning cars amounting to Rs. 1,66,240 be excluded from the purview of disallowance under s.

37(3B) of the IT Act ?”

In the present case, the conveyance allowance was paid to employees who were owning two wheelers or who were commuting by train or bus. It was not paid to employees owning cars. However, learned counsel for the Department placed reliance on the Explanation to s. 37(3B). He contended that in view of cl. (c)(ii) of the said Explanation the above-mentioned conveyance allowance would fall within s. 37(3B) of the Act.

We do not find merit in the above contention. The Explanation must be read along with s. 37 (3B) and, if so read, it is clear that conveyance paid to employees who were not owning cars but who were owning scooters or who were commuting by train or by bus cannot fall within s. 37(3B). In fact, s. 37(3B) refers to expenditure incurred on running and maintenance of motor cars. In this case, we are concerned with conveyance allowance paid to employees owning two wheelers or who were commuting by train or bus. Hence, we do not see any reason to interfere with the findings given by the Tribunal. Accordingly the above question is answered in the affirmative, i.e., in favour of the assessee and against the Department.

The appeal is accordingly dismissed with no order as to costs.

[Citation : 250 ITR 696]

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