COMMISSIONER OF INCOME TAX, HISAR vs. M/S PARKASH INDUSTRIES LTD., HISAR

ITA/291/2004HC Punjab & HaryanaPHHC01051437200424 September 201512 pages
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What were the facts?

The Revenue (Commissioner of Income Tax, Hisar) appealed against an order of the Income Tax Appellate Tribunal (ITAT) for assessment year 1992-93. The ITAT had upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] which allowed depreciation at prescribed rates on plant and machinery and cylinders for the Picture and Tube Division, contrary to the Assessing Officer's (AO) restriction to 50% of prescribed rates. The AO had invoked the third proviso to Section 32(1)(ii) of the Income Tax Act, 1961, as the plant was allegedly used for less than 180 days. Additionally, the CIT(A) directed the AO to allow deductions under Sections 80HH and 80I without adjusting losses from other industrial undertakings of the same assessee. The AO had previously allowed these deductions only after adjusting such losses. The ITAT dismissed the Revenue's appeal, leading to this High Court appeal.

What did the High Court hold?

The High Court decided both issues. On issue 1, concerning depreciation, the Court upheld the ITAT's decision. The Court agreed with the ITAT's interpretation that the third proviso to Section 32(1)(ii) applies only if the asset is acquired and used for less than 180 days within the same previous year. Since the assets were acquired in the previous year 1990-91 and used for less than 180 days in the previous year 1991-92, the proviso was not applicable. The Court found no illegality or perversity in the CIT(A)'s and ITAT's approach. On issue 2, concerning deductions under Sections 80HH and 80I, the Court answered in favour of the revenue, relying on its own judgment in Bajaj Motors P. Limited vs. Commissioner of Income Tax. This judgment held that deductions under Section 80-I are to be computed with reference to the total income, which requires setting off losses from other industrial undertakings against the profits of eligible units. The ratio for this part is that the benefit under Section 80-I is linked to the 'total income', which must be computed after considering all profits and losses of the assessee's industrial undertakings. The appeal was partly allowed.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in upholding the CIT(A)'s direction to allow depreciation at prescribed rates on plant and machinery and cylinders in respect of the Picture and Tube Division, as against 50% of prescribed rates restricted by the AO under the third proviso to Section 32(1)(ii) of the Income Tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in upholding the CIT(A)'s direction to allow deductions under Sections 80HH and 80I of the Income Tax Act, 1961, without adjusting the losses of other loss-making industrial undertakings of the same assessee with the profits of eligible profit-making units? Assessee's contentions: For issue 1, the assessee argued that the third proviso to Section 32(1)(ii) applies only if the asset was acquired and used for less than 180 days in the same previous year. The assets in question were acquired in an earlier year (1990-91) but used for less than 180 days in the previous year under consideration (1991-92). The assessee relied on the principle that taxing statutes must be interpreted strictly based on their plain language, citing cases like Smt. Tarulata Shyam vs. ITO and Cape Brandy Syndicate vs. Inland Revenue Commissioners. Revenue's contentions: For issue 1, the revenue contended that the third proviso to Section 32(1)(ii) applies if the asset was acquired during the previous year and used for less than 180 days. The revenue argued that the words 'previous year' in the proviso are not preceded by 'any', implying it applies to the specific previous year of acquisition and use. The revenue also argued that taxing statutes should not be interpreted to imply provisions not expressly stated. For issue 2, the revenue relied on this Court's judgment in Bajaj Motors P. Limited vs. Commissioner of Income Tax, which held that deductions under Section 80-I are referable to total income, which must be worked out after adjusting losses from other units. The revenue cited Sections 80A(2), 80B(5), and 80AB, and Supreme Court judgments in Distributors (Baroda) P. Ltd. vs. Union of India and H.H. Sir Rama Varma vs. Commissioner of Income-Tax.

Which sections of the Income-tax Act were involved?

Section 260A,Section 32(1)(ii),Section 80HH,Section 80I,Section 80A(2),Section 80B(5),Section 80AB

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 24.9.2015 Commissioner of Income Tax, Hisar ……Appellant

M/s Parkash Industries Limited, Hisar …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE RAMENDRA JAIN

1.

Whether Reporters of local papers may be allowed to see the judgment?

2.

To be referred to the Reporters or not?

3.

Whether the judgment should be reported in the Digest? Present: Mr. Tajender K.Joshi, Advocate for the appellant-revenue. Mr. Anand Chhibbar, Sr. Advocate with Ms. Riya Bansal, Advocate for the respondent-assessee.

Ajay Kumar Mittal,J.

1.

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 8.3.2002, Annexure A.III passed by the income Tax Appellate Tribunal, Delhi Bench 'B' in ITA No.7370/Del./95 for the assessment year 1992-93. This appeal was admitted on 9.8.2007 to consider following substantial questions of law:- “i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in upholding the decision of CIT(A)

The order continues below.

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