COMMISSIONER OF INCOME TAX vs. BHARAT LINDERS PVT. LTD.

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ITR/255/1985HC GujaratGJHC24012384198523 January 2001Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE MR. JUSTICE MOHIT S. SHAH3 pages
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What did the High Court hold?

The High Court held that the Tribunal was right in allowing investment allowance and depreciation on the capitalized value of drawings and specifications. The Court noted that the controversy was concluded by the Supreme Court's decisions in Scientific Engineering House P. Ltd. vs. CIT and CIT, Gujarat vs. Elecon Engineering Co. Ltd. These decisions held that drawings and patterns are considered 'books' and, since 'books' are comprehended within the definition of 'plant' under Section 43(3) of the Income Tax Act, 1961, depreciation is allowable in relation to them. The reference was answered in the affirmative, in favour of the assessee and against the revenue. The reference was disposed of with no order as to costs.

What were the facts?

The assessee, Bharat Linders Pvt. Ltd., claimed depreciation and investment allowance on drawings and specifications for the assessment year 1980-81. The Income Tax Officer (ITO) rejected this claim. The Commissioner of Income Tax (Appeals) [CIT(A)], following the Gujarat High Court's decision in CIT vs. Elecon Engineering Co. Ltd., allowed the claim. The revenue appealed to the Income Tax Appellate Tribunal (ITAT), which confirmed the CIT(A)'s order. The revenue then filed a reference application to the High Court of Gujarat at Ahmedabad, seeking an opinion on the correctness of the ITAT's decision.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in coming to the conclusion that the investment allowance and depreciation should be allowed on the capitalized value of drawings and specifications? (Question of law) Assessee's contention: The assessee claimed depreciation and investment allowance on drawings and specifications. The CIT(A) and Tribunal allowed this claim, relying on the Gujarat High Court's decision in CIT vs. Elecon Engineering Co. Ltd. The assessee's counsel stated that the controversy is concluded by Supreme Court decisions. Revenue's contention: The revenue disputed the allowance of depreciation and investment allowance on drawings and specifications. The ITO rejected the claim, and the revenue appealed to the CIT(A) and then the Tribunal, ultimately filing the present reference application.

Which sections of the Income-tax Act were involved?

Section 43(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 255 of 1985

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 BHARAT LINDERS PVT. LTD. -------------------------------------------------------------- Appearance: MR AKIL KURESHI with MR MANISH R BHATT for Petitioner MR MANISH J SHAH for Respondent No. 1

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

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

Date of decision: 23/01/2001

ORAL JUDGEMENT (Per : MR.JUSTICE J.M.PANCHAL) At the instance of the revenue, the Income Tax Appellate Tribunal, Ahmedabad Bench "A" has referred the following question of law for the opinion of this Court in respect of assessment year 1980-81 :-

"Whether on the facts and in the circumstances of the case, the Tribunal was right in coming to the conclusion that the investment allowance and depreciation should be allowed on the capitalized value of drawings and specifications ?"

2.

The assessee is a Company. It claimed the depreciation and investment allowance on drawings and specifications. The ITO rejected the claim of the assessee. On appeal, the CIT(A), following the decision of the Gujarat High Court in the case of CIT, Gujarat-II comprehended within the definition of `plant' in section 43(3) of the Income Tax Act, 1961, they were plant and depreciation was allowance in relation to the drawings and patterns.

4.

Having regard to the principle enunciated by the Supreme Court in the above referred to decisions, we hold that the Tribunal was right in coming to the conclusion that the investment allowance and depreciation should be allowed on the capitalized value of drawings and specifications.

The reference is accordingly answered in the affirmative i.e. in favour of the assessee and against the revenue. The reference stands disposed of with no order as to costs.

(J.M. Panchal, J.)

(M.S. Shah, J.)

sundar/-

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