Commissioner of Income Tax vs Vardhman Spinning and General Mills Ltd.

G.C. Garg, J.—The CIT, Ludhiana in this petition under s. 256(2) of the IT Act, has prayed that Tribunal, Chandigarh Bench, may be directed to draw a statement of the case and refer the following questions of law to this Court for its opinion :

''1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding extra shift allowance on transformers, electric sub-station and electric motors which are stationary installations ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing guest house expenses when they are not allowable as per s. 37(4) of the IT Act, 1961.

According to the Revenue these questions do arise from the order of the Tribunal dt. 31st March, 1997, in the case of the assessee for the asst. yr. 1985-86.

In response to the notice of motion Mr. Sanjay Bansal, Advocate, appearing with Mr. B. S. Gupta, Senior Advocate has put in appearance for the assessee. According to the learned counsel for the assessee no referable question of law arises from the order of the Tribunal dt. 31st March, 1997.

Learned counsel for the assessee, Mr. Sanjay Bansal, submitted that guest house expenses were allowed by the Tribunal by its order dt. 29th June, 1990 in the case of the assessee for the asst. yr. 1982-83 and the Revenue did not seek any reference. Similarly, disallowance with regard to guest house expenses was deleted and ESA was allowed on transformers, electric sub-station and electric motors by the Tribunal for the asst. yr. 1984-85 in the case of the assessee by order dt. 10th March, 1995 in ITA No. 132/Chandi/1990. According to the learned counsel Revenue did not seek a reference on guest house expenses, but did seek a reference on ESA being granted on electric installations, transformers and weighing scales. The Tribunal, however, granted reference on generator and weighing scales vide its order dt. 13th October, 1995, relating to the asst. yr. 1984-85. The Tribunal only followed its previous view during the asst. yr. 1984-85. The Tribunal only followed its previous view during the asst. yr. 1985-86 (year in question) and 1986-87. The Revenue sought a reference relating to similar questions as in this case relating to asst. yr. 1986-87 in the assessee''s case and reference petition registered as ITC 68 of 1996 has already been dismissed. In the above premises counsel submitted that this petition deserves to be dismissed.

Mr. Bansal, placing strong reliance on M/s. Radhasoami Satsang Saomi Bagh, Agra Vs. Commissioner of Income Tax, Commissioner of Income Tax Vs. S. Murugappa Chettiar, Commissioner of Income Tax Vs. Smt. Kshma Tandon, and CIT vs. Modipon Ltd. (1995) 212 ITR 656 submitted that even on the principle of constructive res judicata this petition deserves to be dismissed as the Revenue did not either seek a reference under s. 256 or it was declined.

We have heard learned counsel for the parties and have also perused the record.

As regards question No. 2 relating to guest house expenses, we are of the opinion that this question is not a referable question of law. The Revenue has either accepted the view of the Tribunal on this question in respect of other assessment years in the case of the assessee or the question has already been declined by the Tribunal or this Court, being not a referable question of law arising from the order of the Tribunal. We thus see no ground to grant this question, it being not a referable question of law.

Insofar as question No. 1 as reproduced above is concerned, it may also be noticed that for the asst. yr. 1986-87 in the case of the assessee the same question did arise. The reference sought by the Revenue, however, was declined by this Court in ITC 68 of 1996 by order dt. 3rd December, 1996. In the normal course, we would have declined the reference on this question as well, but there is another aspect of the matter. In the case of G.N.A. Enterprises Private Limited Vs. Commissioner of Income Tax, this Court came to the conclusion that the following two questions of law are questions of law and thus directed the Tribunal to refer these questions of law along with the statement of the case to this Court for its opinion :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that machinery in the form of diesel engine, transformer, electric switchgears and air circuit breaker valuing Rs. 3,04,748 was not machine tool automatic, semi-automatic entitled to depreciation at 15 per cent, within the meanings of item No. III(B)(8) of Appendix I to r. 5 of the IT Rules, but was general machinery entitled to ten per cent ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in sustaining the view that extra shift allowance on transformer, electric switchgear and air circuit breaker valuing Rs. 1,87,374 was not allowable in view of sub-part 3 (special rates) of Annexure-I to r. 5 as electric machinery as mentioned in serial No. 1 and not special machinery as part III(B)(8) and C(4) of Appendix I to r. 5 of the IT Rules ?

More or less same was the view taken in ITC 23 of 1990, decided on 25th February, 1997, [reported as CIT vs. Vardhman Spinning & General Mills Ltd.].

In view of the above we are of the opinion that question No. 1 is a question of law which arises from the order of the Tribunal. We thus direct the Tribunal to refer the following question of law along with the statement of the case for the opinion of this Court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing extra shirt allowance on transformers, electric sub-station and electric motors which are stationary installations ?"

The petition thus stands disposed of. No. costs.