COMMISSIONER OF INCOME TAX vs. LAKHANPAL NATIONAL LTD.

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ITR/130/1993HC GujaratGJHC24021212199308 March 2001Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE MR. JUSTICE MOHIT S. SHAH3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was not right in law in directing the ITO to allow depreciation of Rs. 14,112/-. The Court relied on its own Division Bench decision in Synbiotics Ltd. Vs. CIT, which in turn followed the Supreme Court's decision in Shree Sajjan Mills Ltd. Vs. CIT. The principle established is that where a capital asset used for scientific research is also used for the business, the Legislature does not intend for a double deduction. This means that expenditure on capital assets for scientific research, once allowed under Section 35(1)(iv), cannot also be claimed for depreciation under Section 32, as this would result in a double deduction for the same expenditure. The reference was answered in the negative, in favour of the Revenue and against the assessee. No issue was expressly left undecided.

What were the facts?

The assessee, Lakhanpal National Ltd., claimed depreciation of Rs. 14,112/- on assets for which the total capital cost had been allowed as a deduction in earlier years under Section 35(1)(iv) for scientific research. The Income Tax Officer (ITO) rejected this claim. The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'A', relying on Bombay High Court decisions, directed the ITO to allow the depreciation. The Revenue preferred a reference to the High Court of Gujarat at Ahmedabad for Assessment Year 1979-80, challenging the ITAT's direction.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing the ITO to allow depreciation of Rs. 14,112/-? Assessee's Contention: The assessee claimed depreciation on assets whose capital cost was previously allowed as a deduction for scientific research. The ITAT, relying on CIT Vs. Mice Products P.Ltd. and CIT Vs. S.H. Kelker & Co. Pvt.Ltd., directed the ITO to allow the depreciation. Revenue's Contention: The Revenue contended that allowing depreciation would amount to a double deduction for the same expenditure. They relied on a Division Bench decision of the Gujarat High Court in Synbiotics Ltd. Vs. CIT, which followed the Supreme Court decision in Shree Sajjan Mills Ltd. Vs. CIT.

Which sections of the Income-tax Act were involved?

Section 32,Section 35(1)(iv)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 130 of 1993

For Approval and Signature:

Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE M.S.SHAH

============================================================ 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 -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus LAKHANPAL NATIONAL LTD. -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No. 1

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

CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE M.S.SHAH

Date of decision: 08/03/2001

ORAL JUDGEMENT (Per : MR.JUSTICE J.M.PANCHAL)

At the instance of Revenue, the Income Tax Appellate Tribunal, Ahmedabad Bench "A" has referred following question of law for the opinion of this Court relating to Assessment Year 1979-80:-

"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing the ITO to allow depreciation of Rs. 14,112/-?"

During the assessment proceedings, the assessee claimed inter-alia depreciation in a sum of Rs. 14,112/on those assets whose total capital cost had been allowed as deduction in earlier years on account of their being treated as assets for research and development that is for scientific research. The assessee's claim was P.Ltd. (1991) 187 ITR 157 and CIT Vs. S.H. Kelker & Co. Pvt.Ltd. (1991) 191 ITR 612, directed the ITO to allow depreciation of Rs. 14,112/- as the capital of the Income-tax Act, 1961, and the other by way of allowance under Section 35(1)(iv) of a part of the capital expenditure on scientific research, even though the two heads of deduction do not completely overlap and there is some difference between the rationale of the two deductions. While laying down the above referred two propositions of law, the Division Bench has followed decision of the Hon'ble Supreme Court in Shree Sajjan of Rs. 14,112/- as the capital expenditure incurred on assets of the research and development. The reference is therefore answered in negative i.e. in favour of the Revenue and against the assessee. The reference stands disposed of accordingly with no order as to costs.

(J.M.Panchal,J.) (M.S.Shah,J.)

*/Mohandas

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