COMMISSIONER OF INCOME TAX vs. EIMCO ELECON (INDIA)LTD.

ITR/37/1995HC GujaratGJHC24022362199506 December 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI5 pages
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What were the facts?

This judgment concerns Income Tax Reference No. 37 of 1995 before the High Court of Gujarat at Ahmedabad. The references were made at the instance of the Commissioner of Income-tax (Revenue) against Eimco Elecon (India) Ltd. (Assessee) for the Assessment Year 1984-85, relating to the accounting period ending June 30, 1983. The references arose from orders passed by the Income-tax Appellate Tribunal, Ahmedabad Bench 'B'. The Revenue appeared through its counsel, Mr. B.B. Naik, while the Assessee, though served, did not appear. The judgment addresses two reference applications: R.A. No. 771/Ahd/94 and R.A. No. 772/Ahd/1994.

What did the High Court hold?

Regarding R.A. No. 771/Ahd/94, the High Court held that the Tribunal was not justified in its finding. Applying the ratio of the Supreme Court decision in *Britannia Industries Ltd. Vs. Commissioner of Income-tax & another*, the Court answered the question in the negative, in favour of the revenue. The principle is that expenditure on spare parts for cars may not be treated solely as repairs and maintenance under Section 31, and Section 37(3A) might be attracted. For R.A. No. 772/Ahd/1994, question 1 was answered in the affirmative, in favour of the assessee. The Court followed the Supreme Court decision in *Commissioner of Income-tax Vs. P.J.Chemicals Ltd.*, holding that depreciation and investment allowance should be allowed on the cost of assets without deducting subsidies received. For question 2, the Court followed its own decision in *Commissioner of Income-tax Vs. Tarun Commercial Mills Ltd.*, which relied on *CIT Vs. Mohan Meakin Breweries Ltd.*, holding that an internal telephone exchange is 'plant' and not 'office appliances'. Therefore, the Tribunal was justified in allowing the investment allowance. The reference was disposed of accordingly.

What were the issues?

The Tribunal had to decide the following questions of law: 1. **R.A. No. 771/Ahd/94:** Whether the appellate Tribunal was right in law and on facts in holding that the amount spent on the purchase of spare parts is a part of repairs and maintenance of cars, covered under Section 31, and that the provisions of Section 37(3A) are not attracted? * **Assessee's Contention:** The amount spent on spare parts is part of repairs and maintenance under Section 31, and Section 37(3A) is not applicable. * **Revenue's Contention:** The Tribunal erred in its finding, and the issue is concluded in favour of the revenue by the Supreme Court decision in *Britannia Industries Ltd. Vs. Commissioner of Income-tax & another*. 2. **R.A. No. 772/Ahd/1994:** a. Whether the appellate Tribunal was right in law and on facts in directing the assessing officer to allow depreciation on the cost of building, investment allowance, and depreciation on the cost of plant and machinery without deducting therefrom the amount of subsidy received by the assessee? * **Assessee's Contention:** The issue is concluded in favour of the assessee by the Supreme Court decision in *Commissioner of Income-tax Vs. P.J.Chemicals Ltd.*. * **Revenue's Contention:** Not recorded, but impliedly against the assessee based on the reference. b. Whether the appellate Tribunal was right in law and on facts in allowing the assessee's claim for investment allowance of Rs.1,06,670/- spent on an internal telephone exchange, treating the same as office appliances? * **Assessee's Contention:** The Tribunal was justified in allowing the claim, following decisions of the High Court and Himachal Pradesh High Court which treated internal telephone systems as 'plant'. * **Revenue's Contention:** Not recorded, but impliedly against the assessee based on the reference.

Which sections of the Income-tax Act were involved?

Section 31,Section 37(3A),Section 33

AI-generated summary — verify with the full judgment below

ITR/37/1995 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.37 of 1995 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ======================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 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 ? 5 Whether it is to be circulated to the civil judge ? ======================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus EIMCO ELECON (INDIA) LTD. - Respondent(s) ======================================================= Appearance : MR BB NAIK for Applicant(s) : 1, SERVED BY RPAD - (N) for Respondent(s) : 1, ======================================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 06/12/2005 ORAL JUDGMENT (Per : HONOURABLE MS.JUSTICE H.N.DEVANI) 1.

The order continues below.

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