MEHSANA DISTRICT CO-OP.MILK PRODUCERS UNION LTD. vs. COMMISSIONER OF INCOME-TAX

PDF · subscribers
ITR/51/1986HC GujaratGJHC24010675198602 July 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA4 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court answered the referred questions based on its prior decisions and those of other courts. For questions 1-4, concerning Section 35-C and the eligibility of expenditure, the court answered them in the negative, in favor of the assessee and against the revenue, as these issues were decided in I.T.R. No. 32 of 1987. Regarding question 5, concerning roads being treated as 'Building' and not 'plant' for depreciation, the court answered in the affirmative, in favor of the revenue and against the assessee, following the ratio in CIT v. Kaira District Co-operative Milk Producers' Union Ltd., 247 ITR 314. For question 6, on depreciation on fencing, the court answered in the negative, against the assessee and in favor of the revenue, as it was answered in I.T.R. No. 55/98. For question 7, regarding contributions under Section 69 of the Gujarat Rajya Sahakari Co-operative Societies Act, the court answered in the negative, in favor of the assessee and against the revenue, citing CIT v. Kaira District Co-operative Milk Producers' Union Ltd., 247 ITR 314. For question 8, on the inclusion of work in progress in capital employed, the court answered in the affirmative, in favor of the assessee and against the revenue, in agreement with CIT v. Alcock Ashdown & Co. Ltd., 224 ITR 353. Finally, for question 9, on depreciation on subsidized plant and machinery, the court answered in the negative, in favor of the assessee and against the revenue, as this was decided in I.T.R. No. 290/84, holding that the Tribunal erred in disallowing depreciation on 30% of the value.

What were the facts?

This case involves an Income Tax Reference before the High Court of Gujarat at Ahmedabad, arising from an order of the Income Tax Appellate Tribunal, Ahmedabad Bench 'A'. Nine questions of law were referred to the High Court at the instance of both the assessee, Mehsana District Co-op. Milk Producers Union Ltd., and the revenue (Commissioner of Income-tax). The questions pertain to the assessment years, though not explicitly stated for all, and concern the eligibility of deductions under Section 35-C, depreciation on roads and fencing, deductibility of contributions under the Gujarat Rajya Sahakari Co-operative Societies Act, inclusion of work in progress in capital employed, and admissibility of depreciation on subsidized plant and machinery. The High Court's decision is based on its prior judgments and those of other courts.

What were the issues?

The Tribunal had to decide nine questions of law. Assessee's questions: 1. Whether the Tribunal was right in its interpretation and application of Section 35-C of the Income-tax Act, 1961. 2. Whether the Tribunal was right in holding that the entire expenditure of Rs. 27,80,627/- was not eligible for weighted deduction under Section 35-C. 3. Whether the Tribunal was right in holding that only 10% of expenses on dissemination of information or demonstration of modern techniques in agricultural/animal husbandry/dairy/poultry farming is eligible for deduction under Section 35-C. 5. Whether the Tribunal was right in treating roads as 'Building' and not eligible for depreciation as 'plant'. 7. Whether the Tribunal was right in holding that contributions made as per Section 69 of the Gujarat Rajya Sahakari Co-operative Societies Act are not deductible. 9. Whether the Tribunal was right in holding that depreciation is not admissible on 30% of the value of plant & machinery received by way of subsidy from the Government. Revenue's questions: 4. Whether the Tribunal was right in granting relief under Section 35-C at 10% of the expenditure. 6. Whether the assessee is entitled to depreciation on fencing at the rate of 10% applicable to plant. 8. Whether the Tribunal erred in holding that work in progress should be included in the computation of capital employed for granting relief for assessment year 1979-80. Assessee's arguments (implied by favorable answers): The assessee contended that the expenditure was eligible for deduction under Section 35-C, roads should be treated as plant, contributions under the Gujarat Act were deductible, and depreciation was admissible on subsidized plant and machinery. Revenue's arguments (implied by unfavorable answers): The revenue contended that the entire expenditure was not eligible for Section 35-C deduction, roads were buildings, contributions were not deductible, and depreciation was not admissible on subsidized plant and machinery. The revenue also argued against depreciation on fencing and inclusion of work-in-progress in capital employed.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 35-C,Section 69

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 51 of 1986

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE 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 Civil Judge? : NO @ MEHSANA DISTRICT CO-OP.MILK PRODUCERS UNION LTD. Versus COMMISSIONER OF INCOME-TAX -------------------------------------------------------------- Appearance:

MR JP SHAH for the Petitioner MR AKIL QURESHI for MR MANISH R BHATT for Respondent No. 1

CORAM : MR.JUSTICE A.R.DAVE and MR.JUSTICE D.A.MEHTA

Date of decision: 02/07/2001

ORAL JUDGEMENT (Per : MR.JUSTICE A.R.DAVE)

At the instance of the assessee as well as the revenue, the following 9 questions have been referred to this court for its opinion by the Income Tax Appellate Tribunal, Ahmedabad Bench 'A' under the provisions of sec. 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') : At the instance of the assessee :

1.

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in its interpretation and application of sec. 35-C of the Income-tax Act, 1961?

2.

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that entire expenditure of Rs. 27,80,627/-- was not eligible for weighted deduction u/s 35-C of the Income-tax Act?

3.

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that only 10% of the expenses incurred on dissemination of information or demonstration of modern techniques and methods of agricultural animal husbandry or dairy or poultry farming or advice on such technique or method is eligible for deduction u/s 35-C of the Income-tax Act?

At the instance of the revenue :

4.

Whether the Appellate Tribunal has been right in law and on facts in coming to the opinion that the relief u/s 35-C of the Income-tax Act, 1961, requires to be granted to the assessee at 10% of the expenditure as claimed by the assessee for assessment year in question?

At the instance of the assessee :

5.

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in treating the roads as 'Building' and not eligible to depreciation as 'plant'?

At the instance of the revenue :

6.

Whether the assessee is entitled in law to the depreciation on fencing at the rate of 10% applicable to plant?

At the instance of the assessee :

7.

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that contribution made as per the provisions of sec. 69 of the Gujarat Rajya Sahakari Co-operative Societies Act is not deductible in computation of total income?

At the instance of the revenue :

8.

Whether the Appellate Tribunal has not erred in law and on facts in holding that work in progress should be included in computation of capital employed for granting relief as claimed for assessment year 1979-80?

At the instance of the assessee :

9.

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that depreciation is not admissible on 30% of the value of the plant & Machinery received by way of subsidy from the Government?

2.

So far as question Nos. 1 to 4 are concerned, it has been submitted by the learned advocates that this Court has decided the said issues in I.T.R. No. 32 of 1987. As per the law laid down by this Court, all the first four questions, which have been referred to this Court hereinabove, shal have to be answered in the negative i.e. in favour of the assessee and against the revenue.

3.

So far as question No. 5 is concerned, it has been submitted by the learned advocates that the said question has been answered in case of CIT v. Kaira District Co-operative Milk Producers' Union Ltd., 247 ITR 314. In view of the ratio of the judgment delivered in the said case, we answer question No. 5 in the affirmative i.e. in favour of the revenue and against the assessee.

4.

So far as question No. 6 is concerned, it has been submitted by the learned advocates that the said question has been answered in I.T.R. No. 55/98. It has been answered in the negative. We therefore answer the said question in the negative i.e. against the assessee and in favour of the revenue.

5.

So far as question No. 7 is concerned, it has been submitted by the learned advocates that the said question has also been answered in case of CIT v. Kaira District Co-operative Milk Producers' Union Ltd, 247 ITR 314. In view of the ratio of the said judgment, we answer question No. 7 in the negative i.e. in favour of the assessee and against the revenue.

6.

So far as question No. 8 is concerned, it has been submitted that the said question has been answered in the affirmative in case of CIT v. Alcock Ashdown & Co. Ltd., 224 ITR 353. In the circumstances, in respectful agreement with the said judgment, we answer the said question in the affirmative, i.e. in favour of the assessee and against the revenue.

7.

So far as the last question, namely, question No. 9 is concerned, it has been submitted by the learned advocates that the said question has also been decided by this court in the case of the assessee itself in I.T.R. No. 290/84. As per the said judgment, the Tribunal was in error in holding that depreciation was not admissible on 30% of the value of the plant and machinery which was received by way of subsidy from the Government. In view of the judgment delivered in ITR No. 290/84, we answer question No. 9 in the negative i.e. in favour of the assessee and against the revenue.

The reference thus stands disposed of with no order as to costs.

(A.R. Dave, J.)

(hn) (D.A. Mehta, J.)

More judgments on Section 256(1)

All 755 judgments and leading authorities on Section 256(1) →

Recent GST High Court judgments

Search GST case law →