COMMISSIONER OF INCOME TAX vs. SHAKTI KHANDSARI UDYOG

ITR/7/1995HC GujaratGJHC24022332199529 November 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI4 pages
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What were the facts?

This case involves an Income Tax Reference filed by the Commissioner of Income Tax (Revenue) against Shakti Khandsari Udyog (assessee) for the Assessment Year 1984-85, corresponding to Samvant Year 2039. The reference was made by the Income-tax Appellate Tribunal, Ahmedabad Bench 'B', at the instance of the Revenue. The High Court of Gujarat at Ahmedabad heard the matter. The Revenue was represented by Mr. T.U. Bhatt, while the assessee, despite being served, did not appear. The reference pertains to two specific questions of law arising from the Tribunal's order.

What did the High Court hold?

The High Court answered both questions in the affirmative, in favour of the assessee and against the Revenue. For the first question, the Court noted that the controversy was concluded by its own decision in CIT vs. Grace Paper Industries Pvt. Ltd., [1990] 183 ITR 591 (Guj.), which was approved by the Apex Court in CIT vs. P.J. Chemicals Ltd., 1994 [210] ITR 830. Therefore, the Tribunal was right in directing that subsidies should not be deducted from the cost of assets for depreciation and investment allowance. For the second question, the Court found that the Tribunal had considered the assessee's letter dated 17th March, 1987, which stated that final expenses of Rs. 39,559/- were incurred in Samvant Year 2039, even though most construction was completed earlier. Based on this finding of fact, the Tribunal correctly held that the assessee was entitled to initial depreciation under Section 32(1)(iv) on the cost of labour quarters in the year under consideration. The Court found no infirmity in the Tribunal's order.

What were the issues?

The Tribunal had to decide two questions of law: 1. Whether the appellate tribunal is right in law and on facts in directing the assessing officer not to deduct the subsidy received by the assessee company from the cost of the assets for the purpose of calculating depreciation and investment allowance, under Section 32 and Section 32A of the Income-tax Act, 1961. 2. Whether the Appellate Tribunal is right in law and on facts in holding that the assessee is entitled to initial depreciation under section 32(1)(iv) of the Act on the cost of labour quarters, which the Assessing Officer contended were completed in an earlier year for which depreciation was granted. Assessee's contentions: Not recorded as the assessee did not appear. Revenue's contentions: The Revenue argued that subsidy should be deducted from the cost of assets for depreciation and investment allowance. Regarding the second question, the Revenue contended that the labour quarters were completed in an earlier year, thus not eligible for initial depreciation in the current year.

Which sections of the Income-tax Act were involved?

Section 32,Section 32(1)(iv),Section 32A,Section 256(1)

AI-generated summary — verify with the full judgment below

ITR/7/1995 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.7 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 SHAKTI KHANDSARI UDYOG - Respondent(s) ===================================================== Appearance : MR TANVISH U BHATT 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 : 29/11/2005 ORAL JUDGMENT (Per : HONOURABLE MS.JUSTICE H.N.DEVANI)

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