COMMISSIONER OF INCOME-TAX vs. VALLABH GLASS WORKS LTD.

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ITR/242/1991HC GujaratGJHC24013475199118 September 2003Author: HONOURABLE MR. JUSTICE D.H.WAGHELA,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court answered both questions in favour of the assessee and against the revenue. For the first question, the Court followed the ratio of the Full Bench decision of the High Court in Commissioner of Income Tax Vs. Gujarat State Fertilizers Co.Ltd., 259 ITR 526, holding that investment allowance and depreciation are allowable on the addition to plant and machinery arising from foreign exchange rate fluctuation. For the second question, the Court followed the ratio of the Supreme Court's decision in Commissioner of Income Tax Vs. Alcock Ashdown and Co.Ltd., 224 ITR 353, affirming the assessee's claim for deduction under Section 80J by including the value of work-in-progress and uninstalled machinery in the 'capital employed'. The reference was disposed of accordingly, with no order as to costs.

What were the facts?

The assessee, Vallabh Glass Works Ltd., is a Public Limited Company engaged in the glass industry. For the assessment year 1976-77, the assessee claimed additional investment allowance and depreciation on the increased value of plant and machinery due to foreign exchange rate fluctuation. The assessee also claimed a deduction under Section 80J of the Income-tax Act, 1961, by including the value of work-in-progress and uninstalled machinery in the 'capital employed'. The Income Tax Officer rejected both claims. The Commissioner of Income Tax (Appeals) upheld the assessee's claims. The revenue appealed to the Income Tax Appellate Tribunal, which confirmed the CIT(A)'s order. The Commissioner of Income Tax then filed a reference before the High Court.

What were the issues?

The High Court of Gujarat was asked to decide two questions of law referred by the Income Tax Appellate Tribunal: 1. Whether the Appellate Tribunal was right in law in granting investment allowance and depreciation on the addition to plant and machinery on account of foreign exchange rate fluctuation? 2. Whether the Appellate Tribunal was right in law in allowing the claim of the assessee relating to the granting of deduction under Section 80J of the Income-tax Act? The revenue, represented by Mrs. Mona M. Bhatt, conceded that both issues were concluded by higher judicial pronouncements. For the first question, the revenue acknowledged that a Full Bench decision of the High Court in Commissioner of Income Tax Vs. Gujarat State Fertilizers Co.Ltd., 259 ITR 526, supported the assessee's contention. For the second question, the revenue conceded that the Apex Court's decision in Commissioner of Income Tax Vs. Alcock Ashdown and Co.Ltd., 224 ITR 353, concluded the issue in favour of the assessee.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 80J

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 242 of 1991

For Approval and Signature:

HON'BLE MR.JUSTICE D.H.WAGHELA and HON'BLE MR.JUSTICE D.A.MEHTA

============================================================ 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 Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals?

-------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus VALLABH GLASS WORKS LTD. -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 242 of 1991 MRS MONA.M.BHATT for MR MANISH R BHATT for Applicant. SERVED BY RPAD - (N) for Respondent No. 1

--------------------------------------------------------------

CORAM : HON'BLE MR.JUSTICE D.H.WAGHELA and HON'BLE MR.JUSTICE D.A.MEHTA

Date of decision: 18/09/2003

ORAL JUDGEMENT (Per : HON'BLE MR.JUSTICE D.A.MEHTA)

1 This is a Reference at the instance of the Commissioner of Income Tax under Section 256(1) of the Income Tax Act, 1961 ('the Act' for short). The following two questions have been referred for the opinion of this Court by the Income Tax Appellate Tribunal, Ahmedabad, Bench 'A':

"[1] Whether, the Appellate Tribunal is right in law in granting investment allowance and depreciation on the addition to plant and machinery on account of foreign exchange rate fluctuation ?"

[2] Whether, the Appellate Tribunal is right in law in allowing the claim of the assessee relating to granting of deduction under Section 80J of the Income-tax Act?"

2 The assessment year is 1976-77 and the relevant accounting period is year ended 31.3.1976. The assessee, a Public Limited Company is engaged in Glass Industry and it claimed additional investment allowance and depreciation on the additional value of plant and machinery on account of foreign exchange rate fluctuation. The assessee Company also claimed deduction under Section 80J of the Act while working out "capital employed" on the value of the work in progress and uninstalled machinery. The Income Tax Officer rejected both the contentions. The assessee carried the matter in Appeal before the CIT (Appeal) who upheld both the claims of the assessee.

3 The department carried the matter in appeal before the Tribunal who confirmed the order of the CIT (Appeal).

4 Heard Mrs.Mona M.Bhatt, learned Standing Counsel for the applicant-revenue. It was fairly conceded by her m.m.bhatt

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