C I T JAIPUR vs. M/S JANPRIYA CEMENT LTD

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ITA/220/2010HC RajasthanRJHC02045675201023 December 2010Author: ARUN MISHRA,BHAGWATI MAHESH2 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal dismissed the appeal filed by the Commissioner of Income Tax. The Court found that the benefit under Section 32 of the Income Tax Act was not granted in absolute terms by the Commissioner of Income Tax (Appeals). Instead, the benefit was made subject to the provisions of Section 56(1)(ii) and Section 57(ii) of the Act. The Court noted that the Commissioner of Income Tax (Appeals) had observed that although the appellant company did not carry out manufacturing activity, the plant and machinery were put to use, generating job work/hire charges income of Rs. 6,60,000/-. This income was to be taxed under the Head 'Income from other Sources', and the assessee would be entitled to deduction under Section 32 read with Section 57(ii). The Assessing Officer was directed to assess the amount accordingly. Since the only argument raised by the Revenue was on the ground of allowing absolute benefit under Section 32, which was not supported by the order, the Tribunal found no substantial question of law. The appeal was accordingly dismissed.

What were the facts?

This Indian ITAT judgment concerns an appeal by the Commissioner of Income Tax, Jaipur-III, against M/s Janpriya Cement Ltd. The assessment year(s) are not explicitly stated but the appeal arises from an order passed by the Income Tax Appellate Tribunal, Jaipur Bench 'B'. The core issue revolves around the assessee claiming depreciation under Section 32 of the Income Tax Act for a company that was not performing and had been lying closed for several years. The Commissioner of Income Tax (Appeals) had allowed the benefit of depreciation, subject to provisions of Section 56(1)(ii) and Section 57(ii) of the Act, considering that the plant and machinery were put to use for job work/hire charges, generating income taxable under 'Income from other Sources'. The Revenue challenged this decision.

What were the issues?

1. Whether the Tribunal erred in law by allowing depreciation under Section 32 of the Income Tax Act to an assessee company that was not performing and had been lying closed for several years, when the plant and machinery were allegedly not in use for the company's primary business. The Revenue argued that the company was not performing and lying closed, thus not entitled to depreciation. The Revenue's primary contention was that the benefit under Section 32 was granted in absolute terms, ignoring the fact that the assessee was not conferring entitlement under the said provision. The Revenue sought to quash and set aside the orders passed by the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals). The Assessee's arguments are not explicitly recorded, but the Tribunal's order implies the assessee contended for the depreciation benefit based on the plant and machinery being put to use for generating job work/hire charges.

Which sections of the Income-tax Act were involved?

Section 32,Section 56(1)(ii),Section 57(ii)

AI-generated summary — verify with the full judgment below

1 D.B. Income Tax Appeal No.220/2010 Commissioner of Income Tax, Jaipur-III, Jaipur Versus M/s Janpriya Cement Ltd. Date of Order : 23.12.2010 HON'BLE THE CHIEF JUSTICE MR. ARUN MISHRA HON'BLE MR. JUSTICE MAHESH BHAGWATI Mr. Sameer Jain, for appellant. It is submitted that similar D.B. Income Tax Appeal No.223/2010 Commissioner of Income Tax Vs. M/s Janpriya Cement Ltd. arising out of the same impugned order has been dismissed by the Division Bench of this court vide order dated 25.10.2010. This court has passed following order on 25.10.2010: “By this appeal, a challenge has been made to the order passed by the Income Tax Appellate Tribunal, Jaipur Bench 'B' Jaipur confirming the order passed by the Commissioner of Income Tax (Appeals)-III, Jaipur. The short controversy raised by the learned counsel for the appellant is that the Company, which was not performing, rather lying closed for several years, claimed depreciation. The Commissioner of Income Tax (Appeals) permitted the benefit under section 32 of the Income Tax Act ignoring the fact that the assessee was not conferring entitlement under the said provision. In view of the aforesaid, the orders passed by the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals) deserve to be quashed and set aside.

We have considered the submissions of the learned counsel for the appellant and perused the record. Perusal of the order passed by the Commissioner of Income Tax (Appeals) shows that the benefit under section 32 of the Income Tax Act has not been given in absolute term, rather benefit is subject to the provisions of Section 56(1)(ii) and Section 57(ii) of the Income Tax Act. In view of the aforesaid, what has been urged before us is not coming out from the order. For ready reference, para 2.3 of the order of the Commissioner of Income Tax( Appeal) is quoted here:-

2 “I have carefully considered the facts of the case and the submissions of the appellant, as noted in para above, it is observed that there is no dispute regarding the fact that though the appellant company did not carry out any manufacturing activity during the year, yet the plant & machinery was put to use and job work/hire charges income from such use, amounting to Rs.6,60,000/- was shown in the profit & loss account. Therefore, such income would fall under the Head 'Income from other Sources', in terms of Section 56(1)(ii) of the Act and the assessee would be entitled to deduction u/s 32, read with the provisions of S.57 (ii) of the Act. Hence, the A.O. is directed to accordingly allow the claim of depreciation to the appellant company.” Perusal of the order shows that the assessing authority has been directed to assess the amount in terms of section 56(1)(ii) read with section 57(ii) of the Income Tax Act. In light of the aforesaid, it is not coming out that absolute benefit exists under section 32 without a condition. The only argument raised is on the ground of allowing absolute benefit under section 32, which is not coming out from the order. Hence, we do not find any substantial question of law for entertaining this appeal. This appeal is accordingly dismissed.”

For the reasons mentioned in the aforesaid cited order, this appeal being the similar one is also dismissed. (MAHESH BHAGWATI), J (ARUN MISHRA),CJ Mohit S/1

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