Commissioner of Income Tax vs J.K. Synthetics Ltd. (No. 2)

Kirpal, J.—In this petition u/s 256(2) of the income tax Act, 1961 (''the Act''), the petitioner seeks a direction to the Tribunal to state the case and to refer the following nine questions of law to this Court:

"1. Whether the Appellate Tribunal was right in law in holding that Nylon-6 yarn is a petrochemical within the meaning of entry No. 18 of the Fifth and Sixth Schedules to the income tax Act, 1961?

Whether the Appellate Tribunal was right in law in accepting the contention of the assessee that it is engaged in the manufacture or production of a petrochemical covered by entry No. 18 of the Fifth and Sixth Schedules to the income tax Act, even after the assessee agreed that, in common parlance, nylon yarn manufactured by it is artificial silk ?

In the absence of any finding that classification of nylon yarn as artificial silk and/or textile material or article was perverse or illegal, was the Tribunal justified in law in determining a different classification for nylon yarn as a petrochemical so as to enable the assessee-company to obtain special benefits of a priority industry u/s 80I and development rebate at a higher rate u/s 33(1)(b)(B)(i) of the income tax Act ?

Whether the Appellate Tribunal was justified in law in allowing higher rate of depreciation at 15 per cent on part of plant and machinery on the basis of its earlier decision dated February 28,1979, in the assessee''s appeal [IT Appeal No. 461 of 1978-79], wherein the department had conceded the claim made by the assessee "that it is engaged in the manufacture of nylon which is artificial silk yarn when, in this case, the Appellate Tribunal held differently to the effect that nylon is a petrochemical ?

Whether the Appellate Tribunal was justified in law in holding that the assessee is entitled to extra shift allowance on the entire plant and machinery including those installed during this year, without making any attempt at determining the number of days the concern worked double shift or triple shift?

Whether the Appellate Tribunal was right in holding that the assessee is entitled to extra shift allowance even on air-conditioning machinery notwithstanding the express prohibition contained in item No. III(ii)(B)(2) of the Table in Part I of Appendix I to the income tax Rules, 1962 ?

Whether the Appellate Tribunal was legally justified in holding that the entire sum of Rs. 62,77,833 claimed by the assessee as repairs to machinery represents revenue expenditure and is an allowable deduction although admittedly no consumption records were maintained by the assessee and the entire amount was debited to the profit and loss account without reference to actual consumption thereof ?

Whether the finding of the Appellate Tribunal that the entire claim of the assessee amounting to Rs. 62,77,833 in respect of repairs of machinery is a business expenditure deductible from its profits is based on any relevant evidence or is vitiated being contrary to evidence on record ?

Whether the finding of the Appellate Tribunal that, out of the entire claim of the assessee amounting to Rs. 62,77,833 in respect of expenditure on repairs to machinery, the sum of Rs. 52,77,833 represents the expenditure on repairs to machinery during this year and the balance of Rs. 10 lakhs is to be considered as part of the opening stock of the next year is based on any relevant material or is vitiated, being based on mere surmises, conjectures and presumptions ?"

With regard to question Nos. 1 to 4, it is clear that the same are concluded by the judgment of the Supreme Court in J.K. Synthetics Ltd. Vs. Commissioner of Income Tax, Kanpur, . In view of the same, the answer to these questions becomes self-evident.

Question similar to question Nos. 7 to 9 were sought to be raised in Commissioner of Income Tax Vs. J.K. Synthetics Ltd. (No. 1), (Delhi). By a judgment in the said income tax case delivered on 17-7-1989, we have declined to refer similar questions.

With regard to question No. 6, it may be noted that the Tribunal has found as a fact that the air-conditioning machinery forms an integral part of the Nylon-6 plant. This being so, the decision of the Supreme Court in the aforesaid case of J.K. Synthetics Ltd. (supra) becomes applicable and, therefore, the answer to this question would also be self-evident.

That leaves question No. 5. The Tribunal, while dealing with this question, has held that it is a question of law but have declined to refer the same because it purported to rely upon for its decision, on what it calls a circular, stated to have been issued by the Board. The Tribunal held that this circular is binding on all the authorities and the department, therefore, cannot agitate this question.

We find that the so-called circular appears to be a letter which has been written by the Board and which letter has been quoted in a decision of the Tribunal. Secondly, what is the interpretation of the rule dealing with the question of extra shift allowance on account of double shift or triple shift has to be interpreted. More so, when, in the present case, we are concerned with the question that when new machinery has been installed, is the extra allowance allowable even if the machinery has been installed on the last day of the accounting year and has worked only for one day? These are questions which are pure questions of law and we, therefore, direct the Tribunal to state the case and refer the following question of law to this Court:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee was entitled to extra shift allowance on the entire plant and machinery including that installed during the relevant previous year irrespective of the fact as to for how many days the concern has worked double shift or triple shift during the previous year ?"

No other question of law is referred. The petition is disposed of. Parties to bear their own costs.