C.I.T. PATIALA vs. M/S ADIRATH TEXTILES LTD.

ITR/592/1995HC Punjab & HaryanaPHHC01032598199530 November 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL2 pages

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What were the facts?

This case involves an Income Tax Reference (ITR) filed by the Commissioner of Income Tax, Patiala (the revenue) against M/s Adinath Textiles Limited (the assessee) for the assessment year 1984-85. The reference arises from an order dated 23.11.1994 passed by the Income Tax Appellate Tribunal, Chandigarh Bench, in ITA No.916/chandi/89. The core of the dispute concerns the calculation of Extra Shift Allowance (ESA) on new machinery added during the year. The revenue challenged the Tribunal's decision to allow ESA based on the working of the concern as a whole, rather than on the basis of the specific machinery working for the requisite number of days.

What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal (ITAT) was right in law in allowing ESA on new machinery added during the year on the basis of the working of the concern as a whole. The Court relied on the Supreme Court's decision in South India Viscose Ltd. v. Commissioner of Income-Tax (1997) 227 ITR 286. The Supreme Court had held that ESA is to be calculated on the basis of the number of days during which the concern had actually worked double shift or triple shift, and not on the basis of the number of days a particular item of machinery worked double or triple shift. Therefore, the Tribunal's view was upheld. The question of law was answered in the affirmative, in favour of the assessee and against the revenue. The reference was disposed of accordingly.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing ESA on new machinery added during the year on the basis of the working of a concern as a whole and not on the basis the machinery worked for requisite number of days? (Question of law) Assessee's Contention: The assessee argued that ESA should be calculated based on the overall working days of the concern, not on individual machinery. Revenue's Contention: The revenue contended that ESA should be calculated based on the number of days each specific piece of machinery worked for the requisite number of shifts.

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Cause title — parties, addresses and appearances

ITR No.592 of 1995 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No.592 of 1995 Date of decision:30.11.2006 The Commissioner of Income Tax, Patiala ....Petitioner versus M/s Adinath Textiles Limited, Chandigarh Road, Ludhiana ....Respondent CORAM: HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present: Mr. SK Garg Narwana, Advocate, for the revenue.

JUDGMENT: Following question of law has been referred for the opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, 'the Tribunal'), arising out of its order dated 23.11.1994 in ITA No.916/chandi/89, for the assessment year 1984-85:- “Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing ESA on new machinery added during the year on the basis of the working of a concern as a whole and not on the basis the machinery worked for requisite number of days?”

We find that the issue has been gone into by the Hon'ble Supreme Court in South India Viscose Ltd. v. Commissioner of Income- Tax (1997) 227 ITR 286, wherein it was observed at page 300:- “For the reasons aforemention

The order continues below.

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