C.I.T.-II, BOMBAY. vs. BAJAJ AUTO LTD., BOMBAY.

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[ASN] [ASN] [ASN]

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL

JURISDICTION

INCOME TAX

REFERENCE NO.65 OF 1990

The Commissioner of Income Tax,

Central II, Bombay.

..Appellant.

Vs.

M/s. Bajaj Auto Ltd.,

Bajaj Bhavan, Nariman Point,

Bombay.

..Respondent.

Mr. Parag Vyas with Mr. P.S.Sahadevan for the

Appellant.

Mrs. Vasanti B. Patel for the Respondent.

CORAM : F.I.REBELLO & R.S.MOHITE, JJ.

DATE : 2ND MARCH, 2009.

ORAL ORAL ORAL JUDGMENT : JUDGMENT : JUDGMENT : ( R.S. Mohite, J.) ( R.S. Mohite, J.) ( R.S. Mohite, J.)

The

questions of law which have been

referred

this court under Section 256(1) of the Income Tax Act

are as follows.

circumstances

the

case,

the

Appellate

Tribunal was justified in upholding the order of

the

Commissioner

of Income tax (Appeals)

that

the

ITO

will recompute the disallowance

under

Rule

by aggregating the expenditure of

all

tours in place of the present computation of the

disallowances

made

by the ITO on the basis

each trip of the employees?

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circumstances

the

case,

the

Appellate

Tribunal was justified in upholding the order of

the

Commissioner

of Income tax (Appeals)

that

the

addition

of Rs.55,27,000/- on

account

duty

drawback

and cash assistance

accrual

basis was not justified?

circumstances

the

case,

the

Appellate

Tribunal was justified in upholding the order of

the

Commissioner

of Income tax (Appeals)

that

the

assessee

is entitled for

depreciation

canteen

building at the higher rate

applicable

to factory building?

circumstances

the

case,

the

Appellate

Tribunal was justified in upholding the order of

the

Commissioner

of Income tax (Appeals)

that

the assessee is entitled to deduction u/s.80G of

Rs.5,00,000/- instead of Rs.2,50,000/-?

circumstances

the

case,

the

Appellate

Tribunal

was

justified

confirming

the

CIT(A)’s

view that the expenditure incurred

advertisement

for

appointment/termination

dealers

taking to recruitment of

personnel Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:49:50

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contemplated

under section 37(3B) (ii) and that

such

expenditure

outside

the

purview

disallowance u/s.

37(3A) of the Act?

As regards Question No.1, Counsel submits that

the

issue referred is answered affirmatively by the decision

this

court

the case of CIT

Vs.

Aorow

India CIT

Vs.

Aorow

India CIT

Vs.

Aorow

India

Limited Limited Limited

reported in 229 ITR 325.

reported in 229 ITR 325.

reported in 229 ITR 325.

In the circumstances,

question is answered in the affirmative and against the

assessee.

regards Question No.2, this question

has

been

answered

affirmatively by the Judgment of this court in

the

case

CIT Vs.

Matchwell Electricals

(1)

Ltd. CIT Vs.

Matchwell Electricals

(1)

Ltd. CIT Vs.

Matchwell Electricals

(1)

Ltd.

reported reported reported

in 263 ITR 227.

in 263 ITR 227.

in 263 ITR 227.

Following the said

judgment,

we answer this question in the affirmative and in favour

of the assessee.

regards

Question No.3, this

issue

was

first

considered

by the Madras High Court in the case CIT Vs. CIT Vs. CIT Vs.

Engine Engine Engine

Valves

Ltd.

(Mad.) reported in [1980] 126

ITR

Valves

Ltd.

(Mad.) reported in [1980] 126

ITR

Valves

Ltd.

(Mad.) reported in [1980] 126

ITR

observed as under.

"But,

whatever

expression we might

employ

describe the culinary process, there is no doubt

whatever that the use of fuel and other forms of

energy

in that part of the canteen, would

have Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:49:50

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the

same

damaging

effect on the life

the

building

regular

manufacturing

process

would

by the use of plant of machinery.

These

considerations

definitely

point

the

conclusion

that

a canteen building is, in

the

proper sense of the term, a factory building for

the purpose of depreciation allowance.."

The Judgment of the Madras High Court was

followed

the Karnataka High Court in the case of Commissioner Commissioner Commissioner

of of of

Income

Tax,

Karnataka-I,

Bangalore

Vs.

Motor

Income

Tax,

Karnataka-I,

Bangalore

Vs.

Motor

Income

Tax,

Karnataka-I,

Bangalore

Vs.

Motor

Industries Industries Industries

Company

Ltd.

reported in 158 ITR

734

Company

Ltd.

reported in 158 ITR

734

Company

Ltd.

reported in 158 ITR

734

and

both

these

judgments

were

again

approved

the

Karnataka

High Court in its later judgment in the

case

CIT Vs.

Motor Industries Co.

Ltd.

(No.2) reported CIT Vs.

Motor Industries Co.

Ltd.

(No.2) reported CIT Vs.

Motor Industries Co.

Ltd.

(No.2) reported

inin in 229

229

229 ITR 137.

ITR 137.

ITR 137.

This issue was once again dealt with by

the

Karnataka

High Court in the case of Widia

(India) Widia

(India) Widia

(India)

Ltd. Ltd. Ltd.

Vs.

Chief Commissioner of Income tax reported in

Vs.

Chief Commissioner of Income tax reported in

Vs.

Chief Commissioner of Income tax reported in

233 233 233

ITR

ITR

ITR

1 wherein it was once again held that

Canteen

building

located

with factory premises for welfare

workmen is part and parcel of factory building- entitled

to higher rate of depreciation.

On this question we are in respectful agreement with

the

reasoning and finding of the Madras High Court

and

the

Karnataka High Court in the aforesaid stated cases.

Section

32(1) provides that depreciation in respect

assets

will be percentage of its written down value

as Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:49:50

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may

be prescribed.

These percentages are prescribed in

rule-5 read with Appendix-I to the Income Tax Rules,

1962.

Appendix I prescribes

higher rate of

depreciation in respect of "factory buildings (exclusive

office, godowns, officers and employees quarters, roads,

bridges, culverts, wells and tube wells)".

Under the Factories Act, factories which employ over

250

workmen,

are

mandatorily required

provide

canteen.

The

canteen

premises is

thus

necessary

adjunct

to the factory building and it is meant for the

benefit

of the workers.

It is also noticed that

while

making

exclusion

respect

various

kinds

buildings

such

as offices, quarters,

roads,

bridges,

culverts, wells and tube wells, no specific exclusion is

made

for

canteens.

If canteens were meant to

attract

the

lower

depression applicable to general

buildings,

then

it would have been specifically excluded from

the

term

factory

buildings

appearing

Appendix-I

Part-1(i)(2). We therefore, answer this question in the

affirmative and in favour of the assessee.

As regards Question No.4 both sides agree that

the

same

covered by the decision of this court

the

case

CIT

Vs.

Mafatlal

Fine

Spinning

and CIT

Vs.

Mafatlal

Fine

Spinning

and CIT

Vs.

Mafatlal

Fine

Spinning

and

Manufacturing Manufacturing Manufacturing

Co.

Ltd.

reported in 263 ITR 140.

Co.

Ltd.

reported in 263 ITR 140.

Co.

Ltd.

reported in 263 ITR 140.

On Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:49:50

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perusing

the

said judgment and following the same,

answer the question in the negative and against the

assessee.

regards

Question No.5 it would

useful

reproduce Section 37(3) (A) and 3(B) which were in force

during the relevant assessment years. The relevant

parts of the said sections are as under.

"3(A)

Notwithstanding

anything

contained

sub-section

(1)

but without prejudice

the

provisions

of sub section (2B) or sub-

section

(3), where the aggregate expenditure incurred by

assessee

advertisement,

publicity

and

sales

promotion in India exceeds forty thousand

rupees, so much of such aggregate expenditure as

equal

to an amount calculated

provided

hereunder

shall not be allowed as a

deduction,

namely :-

(i)

Where

such aggregate expenditure does

not

exceed

1/3 per cent of the turnover or, as

the

case

may be, gross receipts of the business

profession.

10 per cent of the adjusted expenditure;

(ii) Where such aggregate expenditure exceeds Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:49:50

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1/4 per cent but does not exceed 1/2 per cent of

the turnover or, as the case may be, gross

receipts of the business or profession.

12.1/2 per cent of the adjusted expenditure;

(iii) Where such aggregate expenditure exceeds

1/2 per cent, of the turnover or, as the case

may be, gross receipts of the business or

profession.

15 per cent of the adjusted expenditure.

Explanation- For the purposes of this sub-section-

(a)

"adjusted expenditure" means the

aggregate

expenditure

incurred

the

assessee

advertisement,

publicity and sales promotion in

India

as reduced by so much of such expenditure

is not allowed under sub-section (1) and

further

reduced by so much of such

expenditure

not

allowed under sub-section

(2B)

sub-section (3) :

(b)"turnover" and "gross

receipts" means

turnover or gross receipts, as the case may be,

as reduced by any discount or rebate allowed by

the assessee. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:49:50

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3(B) Nothing contained in sub-section (3A) shall

apply in relation to any expenditure incurred by

an assessee on-

(i) advertisement in any small newspaper;

(ii)

advertisement

any

newspaper

for

recruitment of personnel;............"

It was sought to be contended that Section 37(3B)(ii)

provided

that the benefit to be conferred under Section

37(3A)

would

not apply to expenditure incurred by

the

assessee

advertisement

newspaper

for

recruitment

personnel.

In the

present

case

the

advertisement

was given for appointment of dealers.

our

view,

the appointment of a dealer by the

assessee

would

not be akin to recruitment of personnel.

word

personnel

as defined in the Oxford dictionary is "staff

of an organization, people engaged in particular service

profession

etc.

employees, manpower,

people,

staff,

workers,

workforce.

profession etc." A dealer in

our

view

is an independent entity and is an agent who would

not

be covered by the term personnel.

Such an agent is

appointed

under

contract

agency

and

not

recruited.

our

view, therefore, the

question

required to be answered in the negative and in favour of

the assessee. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:49:50

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stands disposed off. No order as to costs.

(R.S. MOHITE, J.)

( F.I. REBELLO, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:49:50 Powered by TCPDF (www.tcpdf.org)