COMMISSIONER OF INCOME TAX PATIALA vs. M/S RIETA BISCUITS CO.LTD PATIALA

PDF · subscribers
ITR/398/1995HC Punjab & HaryanaPHHC01032470199517 August 2007Bench: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE M.M. KUMAR2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that for the assessment year 1986-87, the question of law referred to it is answered against the revenue and in favour of the assessee. This decision is based on the Court's separate judgment delivered on the same day in ITR No. 35 of 1991, concerning the assessee for the assessment year 1983-84. The Court noted that there was no change in the circumstances between assessment year 1983-84 and 1986-87. The reasoning, as indicated by the reference to the prior judgment, would have established that the assessee was entitled to investment allowance even if the machinery was leased out and the assessee was deriving lease income, provided the machinery was used for the purpose of business of manufacturing or production. The ratio decidendi would be that leasing out machinery for production by another entity does not disentitle the owner of the machinery from claiming investment allowance if the machinery itself is new and used for eligible business purposes. The reference is disposed of accordingly.

What were the facts?

The Commissioner of Income-Tax, Patiala (Revenue) has referred a question of law to the High Court of Punjab and Haryana at Chandigarh, arising from an order of the Income Tax Appellate Tribunal (Tribunal) in ITA No. 638/Chandi/89 concerning assessment year 1986-87. The assessee is M/s Rieta Biscuits Co. Pvt. Ltd., Patiala. The Tribunal upheld the order of the Commissioner of Income-Tax (Appeals) [CIT(A)] allowing investment allowance to the assessee on new machinery. The Revenue's contention is that the assessee was not carrying on production but was deriving only lease income from the plant and machinery which were leased out to another company. The Tribunal noted that the circumstances for assessment year 1986-87 were unchanged from assessment year 1983-84, for which a separate judgment was delivered.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the order of the CIT(A) allowing investment allowance to the assessee on new machinery when the plant and machinery were leased out by the assessee to another company and the assessee was not carrying on any production and was deriving only lease income? (Question of law) Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, it implies that the assessee would have supported the CIT(A)'s and Tribunal's decision allowing the investment allowance. Revenue's Contention: The Revenue contended that investment allowance should not be allowed as the assessee was not engaged in production but was merely deriving lease income from the machinery, which was leased out to another company. The Revenue argued that the condition for allowing investment allowance, which requires the assessee to be engaged in the business of manufacturing or producing articles or things, was not met.

Which sections of the Income-tax Act were involved?

Section 32A

AI-generated summary — verify with the full judgment below

I.T.R.

N o. 398 of 1995

-1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.R.

N o. 398 of 1995

Date of decision: 17.8.2007 The Commissioner of Income-Tax, Patiala ...Petitioner Versus M/S Rieta Biscuits Co. Pvt. Ltd., Patiala ...Respondent CORAM: HON'BLE MR. JUSTICE M.M.KUMAR HON'BLE MR.JUSTICE RAJESH BINDAL Present: Mr. Yogesh Putney, Advocate for the Petitioner

Mr. Akshay Bhan, Advocate for the respondent.

**** RAJESH BINDAL,J. Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short “the Tribunal), arising out of order passed in I.T.A.No. 638/Chandi/89 in respect of the assessment year 1986-87 :- Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the order of the CIT(A) allowing investment allowance to the assessee on new machinery when the plant and machinery were leased out by the assessee to another company and the assessee was not carrying on any production and was deriving only lease income? Detailed facts are not required to be mentioned as it is noticed from the order of the Tribunal that while deciding the appeal, the order passed by it for the year 1983-84 was referred and relied upon. It is categorically noticed in the order that there is no change in the

I.T.R.

N o. 398 of 1995

-2- *** circumstances as existed in the year 1983-84 if compared with the assessment year in question. We have considered the issue in case of the assessee for the assessment year 1983-84 vide our separate judgment delivered today in ITR No.35 of 1991 and have answered the same against the revenue and in favour of the assessee. For the reasons stated therein, the question referred is answered against the revenue and in favour of the assessee. The reference is disposed of accordingly. (Rajesh Bindal) Judge August 17, 2007 (M.M.Kumar) Pka Judge

More judgments on Section 32A

All 120 judgments and leading authorities on Section 32A →

Recent GST High Court judgments

Search GST case law →