HIMSON FADIS MACHINERY PVT LTD vs. COMMISSIONER OF INCOME-TAX

ITR/17/1998HC GujaratGJHC24024375199815 April 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE Z.K.SAIYED11 pages
AI SummaryDismissed

What were the facts?

The assessee, Himson Fadis Machinery Pvt Ltd, a private limited company, leased machineries from Himson Engineering Private Ltd. For Assessment Years (AY) 1987-88 and 1988-89, the assessee paid hire charges of Rs. 80,000/- and Rs. 1,20,000/- respectively. These leased machineries were used for manufacturing machine parts and job work, commencing from April 1986. The assessee claimed deduction under Section 80-I of the Income Tax Act, 1961, which was initially allowed by the Assessing Officer (AO). The Commissioner of Income Tax (CIT) initiated proceedings under Section 263, holding that the assessee was not entitled to the deduction as it did not own the machineries. The CIT directed the AO to withdraw the relief for AY 1987-88 and set aside the assessment for AY 1988-89 for fresh assessment. The assessee's appeal against the AO's order giving effect to the CIT's order for AY 1987-88 was not entertained by the CIT(A). The assessee's appeals before the Income Tax Appellate Tribunal (Tribunal) against the CIT's orders and the CIT(A)'s refusal to entertain the appeal were dismissed.

What did the High Court hold?

The High Court held that the Tribunal was right in confirming the CIT's order under Section 263. The Tribunal had found that there was no material to show when the leased machineries were set up or used by the lessor, nor that the industrial unit was new or that the leased machineries were new at the time of lease. The Tribunal concluded that condition (ii) of sub-section (2) of Section 80-I, which states that the industrial undertaking is not formed by the transfer to it of machinery or plant previously used for any purpose, was not satisfied. The Tribunal viewed the lease as a transfer. The Court found that the Tribunal's finding that the machineries and plant were previously used by the lessor and that the lease amounted to a transfer was a factual finding. Therefore, the Court did not need to delve into the larger controversy of whether ownership was a necessary prerequisite. The Court answered the first question in the affirmative, in favour of the revenue. Consequently, the second question regarding the CIT(A)'s refusal to entertain the appeal became infructuous.

What were the issues?

1. Whether, on the facts and circumstances, the Tribunal was right in confirming the CIT's orders under Section 263, holding that the assessee company was not entitled to deduction under Section 80-I for not satisfying the condition in clause (ii) of sub-section (2) of Section 80-I of the Act. (Question of law). The assessee argued that both the CIT and the Tribunal erred by considering ownership of machineries as a prerequisite for Section 80-I deduction and that the Tribunal's order did not correctly record facts. The assessee also referred to subsequent assessment years where similar claims were allowed. The revenue relied on the Tribunal's findings. 2. Whether, on the facts and circumstances, the Tribunal was right in law in holding that the CIT(A) rightly refused to entertain the appeal against the AO's order giving effect to the CIT's order under Section 263 for AY 1987-88. (Question of law).

Which sections of the Income-tax Act were involved?

Section 256(1),Section 80-I,Section 80I,Section 263,Section 254(2)

AI-generated summary — verify with the full judgment below

ITR/17/1998 1/11 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 17 of 1998 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MR.JUSTICE Z.K.SAIYED ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5 Whether it is to be circulated to the civil judge ? NO ========================================================= HIMSON FADIS MACHINERY PVT LTD - Applicant(s)

Versus COMMISSIONER OF INCOME-TAX - Respondent(s) ========================================================= Appearance : MR RK PATEL for Applicant(s) : 1, MR MANISH R BHATT for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 15/04/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA) 1 The

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