COMMISSIONER OF INCOME TAX vs. DINESH MILLS LTD.

ITR/330/1992HC GujaratGJHC24015670199219 January 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI4 pages
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What were the facts?

The assessee, Dinesh Mills Ltd., is a Limited Company. The assessment year is 1982-83. The Revenue, Commissioner of Income Tax, is challenging the order of the Income-tax Appellate Tribunal, Ahmedabad Bench "A". The dispute pertains to two issues: a disallowance of Rs. 20,000/- on account of motor car expenses claimed to be for personal and non-business use, and the entitlement to investment allowance on a Computer O.R.G. 200-B Microprocessor. The Assessing Officer disallowed the motor car expenses as a lump sum, attributing it to non-business use. The CIT (Appeals) and the Tribunal deleted this disallowance, relying on previous decisions. For the investment allowance, the Assessing Officer held the computer was not plant and machinery for manufacturing. The CIT (Appeals) and Tribunal allowed it, citing the Bombay High Court decision in C.I.T. v. IBM World Trade Corporation.

What did the High Court hold?

The High Court answered both questions in favour of the assessee and against the Revenue. For the first issue concerning motor car expenses, the Court followed its earlier decision in the assessee's own case for the preceding assessment year (1981-82) and also relied on the decision in Sayaji Iron Engineering Co. v. C.I.T. (2002) 253 ITR 749. The reasoning was that the Tribunal's finding, which was confirmed by the High Court, was that the disallowance of Rs. 20,000/- was not justified on the grounds of personal and non-business use. For the second issue regarding investment allowance on the computer, the Court followed its decision in C.I.T. v. Professional Information Systems & Management, rendered on the same day in Income Tax Reference No. 304 of 1992. The principle derived is that if a computer is considered an item of plant and machinery, investment allowance is admissible, irrespective of whether it is directly connected to manufacturing, especially when supported by High Court precedents like C.I.T. v. IBM World Trade Corporation. The reference was disposed of accordingly, with no order as to costs.

What were the issues?

The Tribunal had to decide the following two questions of law referred by the Revenue: 1. Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in holding that a sum of Rs. 20,000/- out of motor car expenses is not disallowable on the ground of personal and non-business use of motor car in the hands of the assessee? 2. Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal is right in holding that the assessee was entitled to investment allowance on computer O.R.G. 200-B Microprocessor? Assessee's Contention: For question 1, the assessee relied on the Tribunal's decision for the assessment year 1981-82 in its own case and this Court's decision in Income Tax Reference No. 20 of 1998. For question 2, the assessee relied on the CIT (Appeals)'s decision which in turn relied on C.I.T. v. IBM World Trade Corporation (1981) 130 ITR 739 (Bombay High Court). Revenue's Contention: The Revenue contended that the sum of Rs. 20,000/- was disallowable due to personal and non-business use of the motor car. For the investment allowance, the Revenue argued that the computer was not an item of plant and machinery connected with manufacturing activity. Both parties accepted that identical controversies had been decided by this Court.

Which sections of the Income-tax Act were involved?

Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 330 of 1992

For Approval and Signature:

HON'BLE MR.JUSTICE D.A.MEHTA and HON'BLE MS.JUSTICE H.N.DEVANI

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the concerned : NO Ma

The order continues below.

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