Calcutta H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing investment allowance on jeeps and motor-cycles owned by the assessee under s. 32A of the IT Act, 1961 ?

High Court Of Calcutta

CIT vs. General Fibre Dealers (P) Ltd.

Sections 32(1), 32A, 35C

Y.R. Meena & Ranjan Kumar Mazumdar, JJ.

IT Ref. No. 70 of 1994

25th April, 2000

JUDGMENT

Y.R. MEENA, J. :

On an application under s. 256(1) of the IT Act, 1961, the Tribunal has referred the following questions set out in para. 6 at p. 6 of the statement of case for our opinion :

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing investment allowance on jeeps and motor-cycles owned by the assessee under s. 32A of the IT Act, 1961 ?

Whether, on the facts and circumstances of the case, the Tribunal was justified in allowing extra shift allowance on building and furniture as per s. 32 r/w r. 5 of the IT Rules, 1962 ?

Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to relief under s. 35C of the IT Act, 1961 ?”

2. The assessee has filed its return on 20th Nov., 1978, showing the total income of Rs. 2,62,601. The assessment was completed under s. 144 on 31st Jan., 1981. That was cancelled and in fresh assessment, the assessee wasasked to explain why a sum of Rs. 5,00,640 should not be added in the total income of the assessee. The ITO further noticed that the assessee has claimed investment allowance on jeeps and motor-cycles under s. 32A of the IT Act, 1961, and extra shift allowance on building and furniture as per s. 32 r/w r. 5 of the IT Rules, 1962. He disallowed both and also disallowed the claim of the assessee that the assessee is entitled for any relief under s. 35C of the IT Act, 1961. In appeal before the CIT(A), following the decision of this Court in Ramnagar Cane and Sugar Co. Ltd. vs. CIT (1981) 128 ITR 716 (Cal) : TC 15R.587, the view taken by the ITO was confirmed so far as the claim under s. 35C of the Act is concerned. He allowed the investment allowance on the ground that the ITO himself has allowed investment allowance on jeeps and motor-cycles in the asst. yr. 1979-80. But it appears that the CIT(A) has not considered the dispute regarding extra shift allowance on building and furniture as per s. 32 r/w r. 5 of the IT Rules, 1962. In appeal before the Tribunal, the Tribunal has considered the claim of the assessee whether the assessee is entitled for investment allowance on jeeps and motor-cycles used in the tea garden. In para. 6, the Tribunal has concluded its judgment holding that jeeps and motor-cycles are required to use in supervising and inter-departmental and inter-sectional management of the tea estate and, therefore, is entitled for investment allowance under s. 32A of the Act. Tribunal has further considered the ground relates to extra shift allowance in respect of buildings and furniture used in the concern of the assessee in paras 12, 13 and 14. Tribunal has taken the view that as the normal allowance is equal to extra shift allowance then why the normal allowance should not be allowed. The extra shift allowance also falls within the definition of normal allowance. Therefore, assessee is entitled for extra shift allowance-depreciation on building and furniture.

The issue raised in question No. 3, Tribunal has considered it in its judgment in paras 17 to 22 and the Tribunal has concluded its view holding that the agriculture developments and works in the representative capacity of cultivating the land and more area was brought under cultivation of tea gardens, the assessee is entitled for deduction under s. 35C of the IT Act. Heard learned counsel for the parties. The provisions of s. 32A of the Act requires that assessee is entitled for investment allowance, inter alia, on the machinery or plant specified in sub-s. (2) which is owned by the assessee and is wholly used for the purpose of business carried on by him. The jeep and motor-cycle at no stretch of imagination can be treated as machinery and plant. They are vehicles which can be used inside or outside the garden. When motor jeep and motor-cycle are not a machinery or plant, referred in s. 32A, they are not entitled for the investment allowance. Assessee also claimed extra shift allowance on depreciation under s. 32 of the Act r/w r. 5 of the IT Rules, What should be the rate of depreciation and whether any plant or machinery or building is entitled for extra shift allowance Appendix I, r. 5, of the IT Rules, 1962, has specified the rates of depreciation for buildings, furniture and fitting, machinery and plant. These are the three heads. Assessee has claimed an extra shift allowance depreciation on building and furniture. For building and furniture which is under heads I & II in Appendix I, Part I, there is no provision for extra shift allowance to a building or furniture and fitting. Though there are different rates on depreciation in case of buildings i.e., 5 per cent in case of general buildings and special rates for factory buildings i.e., the rate of depreciation is 10 per cent and in case of purely temporary erection such as wooden structure the rate of depreciation is 100 per cent. When no extra shift allowance to depreciation is provided for the building or furniture the Tribunal has erred in concluding that the building and furniture in case of this assessee is entitled for extra shift allowance.

5. Now we come to the question whether assessee is entitled for deduction under s. 35C of the Act, learnedcounsel for the Revenue has placed reliance on the decision of this Court in the case of Ramnagar Cane & Sugar Co. vs. CIT (supra) and in case of CIT vs. Nav Bharat Enterprises (P) Ltd. (1987) 62 CTR (AP) 189 : (1987) 165 ITR 603 (AP) : TC 15R.1002.

6. Learned counsel for the assessee Mr. Khaitan submits that the benefits and services are extended to the cultivators and growers. Therefore, the assessee is entitled for deduction under s. 35C of the Act.

7. In Ramnagar Cane and Sugar Co. Ltd. (supra) this Court has taken the view that the company growing sugarcane, manufacturing sugar and selling same, expenditure incurred by the company for providing seeds, manure, etc. to its own sugar farm as the services and goods or facilities are not extended to the person distinct from the company. The word ‘person’ occurring in s. 35C does not include the company itself which provides the goods or facilities to itself. The same view has been taken by Andhra Pradesh High Court in Nav Bharat Enterprises (P) Ltd. (supra) whether the deduction can be allowed under s. 35C in a case where the company in spending the amount for development and extended that facility in cultivation for its own land, the Andhra Pradesh High Court has the same view that company is not entitled for deduction under s. 35C which is reported in (1987) 62 CTR (AP) 189 : (1987) 165 ITR 603 (AP) : TC 15R.1002 (supra) and at p. 611 it was observed as under : “It would be evident from the above analysis that if any amount is spent by the assessee for developing his/its own land, or for improving seeds or providing modern or better techniques for its own purposes, deduction cannot be allowed, because the section contemplates goods, service or facilities being provided to another person, and not by the assessee to himself/itself. It may, however, happen that though the agricultural operations are carried on on its own land, yet the land may be used for providing better seeds to other agriculturists, or for dissemination of information to them, or the land may be used as a demonstration farm for application of modern techniques or methods of agriculture, etc. for the benefit of other agriculturists engaged in raising tobacco. In such a case, deduction would be permissible. If deduction is granted under this provision, deduction under any other provision of the Act, including s. 37, cannot be granted either for the same assessment year, or for any other assessment year. The ITO to whom the matter has been remanded by the Tribunal shall look into the facts and circumstances of this case in the light of the above analysis of the section and pass orders according to law.”

8. The admitted facts are that assessee has provided the goods and extended the facilities for agriculture produce in its own farm. When the facilities and goods are provided for agriculture produce in assessee’s own farm and for benefit of assessee and not extended these facilities to the third person i.e., a person distinct from the assesseecompany, the assessee is not entitled for deduction under s. 35C also. In the result, we answer all these questions in negative i.e., in favour of the Revenue and against the assessee. The reference application is thus disposed of.

[Citation : 248 ITR 622]

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