REHABILITATION PLANTATIONS LTD vs. COMMISSIONER OF INCOME TAX

ITA/29/2008HC KeralaKLHC01026934200829 January 2018Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON18 pages
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What were the facts?

The assessee, Rehabilitation Plantations Limited, is engaged in the business of manufacturing and selling centrifuged latex and rubber. The appeal pertains to the assessment year 2002-2003, when Rule 7A of the Income Tax Rules, 1962, was introduced. This rule made 35% of income previously assessed under the Kerala Agricultural Income Tax Act, 1991, assessable under the Income Tax Act, 1961. The dispute concerns the depreciation allowable on plant and machinery. The assessee claimed depreciation on the original cost, while the Assessing Officer and Commissioner of Appeals restricted it to the written down value, considering depreciation previously claimed under the Agricultural Income Tax Act. The Income Tax Appellate Tribunal upheld this restriction, relying on CIT v. Parry Agro Industries Ltd.

What did the High Court hold?

The High Court allowed the appeal in favour of the assessee. The Court held that the deeming provision of Rule 7A was clear and did not exclude depreciation allowed under the Agricultural Income Tax Act from the computation of the cost of assets. The Court acknowledged the revenue's argument about avoiding a double benefit but stated that it could not add words to the statute. The Court noted that Explanation 7 to Section 43(6), which was introduced retrospectively from 1.4.2010 by the Finance Act, 2009, addressed the defect of double benefit. However, this amendment was not applicable to the assessment year 2002-03. The Court cited J.K. Synthetics Ltd. v. C.T.O. and Maruti Wire Industries Ltd. v. S.T.O. Mattancherry to emphasize that a legislative casus omissus cannot be supplied by judicial interpretation. Therefore, the Court directed the Assessing Officer to compute the written down value de hors the depreciation granted under the Agricultural Income Tax Act, take 35% of the cost of total assets as the written down value, and allow depreciation to that extent for the relevant assessment year. The Assessing Officer was instructed to deem the written down value as the cost of assets and apply 35% of this deemed written down value to the portion of income assessable under the Income Tax Act.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in restricting the depreciation allowed to the amount worked out on the written down value of the assets as against the original cost of the assets claimed by the assessee, concerning Section 32(1) and Section 43(6) of the Income Tax Act, 1961? 2. In the facts and circumstances of the case, ought not the Tribunal have held that applying the provisions of Rule 7A of the Income Tax Rules and Section 43(6) of the Income Tax Act, the claim of depreciation of the appellant on the original cost was in order? Assessee's contentions: The assessee argued that the decision relied upon by the Tribunal was not applicable. They placed reliance on Commissioner of Income Tax v. Doom Dooma India Ltd. (SC), which held that 'actual cost to the assessee' in Section 43(6) means the actual cost incurred, irrespective of when the asset was acquired. Even if acquired prior to the previous year, if no depreciation was claimed, the claim could be raised to the extent of the actual cost. The assessee also contended that the Assessing Officer relied on the minority opinion in Doom Dooma India Ltd. Revenue's contentions: The revenue contended that the legislature would not have intended to grant a double benefit. Since the assessee was previously assessed under the Agricultural Income Tax Act, which also permitted depreciation, whatever depreciation was claimed from the actual cost of assets cannot be granted again under the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 32(1),Section 43(6)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 29TH DAY OF JANUARY 2018 / 9TH MAGHA, 1939 ITA.No. 29 of 2008 AGAINST THE ORDER/JUDGMENT IN ITA 184/(COCH)/2007 (2002-03) of I.T.A.TRIBUNAL,COCHIN BENCH DATED 31.10.2007 APPELLANT(S)/APPELLANT IN ITA REHABILITATION PLANTATIONS LIMITED, PUNALUR. BY ADV.SRI.E.K.NANDAKUMAR (SR.) RESPONDENT(S)/RESPONDENT IN ITA: COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX BY SRI. MOHAMMED RAFEEQ [SR. G.P] THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29-01-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA 29/2008 APPENDIX COURT EXHIBITS ANNEXURE-C1 : REPORT SUBMITTED BY THE ASST. COMMISSIONER OF STATE TAX, STATE GOODS AND SERVICE TAX DEPT., KOTTARAKKARA (ASSESSING OFFICER UNDER AIT ACT). ANNEXURE-C2 : REPORT OF THE ASST. COMMISSIONER OF INCO

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