Panipat Co-operative Sugar Mills Ltd. vs Commissioner of Income Tax

J.V. Gupta, J.—Both the revenue as well as the assessee filed separate applications requiring the Income Tax Appellate Tribunal, Chandigarh Bench, to refer to the High Court certain questions of law, which were said to have arisen out of its order dated October 29, 1974. Accordingly, the Tribunal has referred two questions to this court for opinion, question No. 1 is at the instance of the assessee, whereas question No. 2 has been referred at the instance of the revenue,

Question No. 1.

" Whether, on the facts and circumstances of the case, the Tribunal was right, in law, in holding that the contribution of Rs. 3,490 by the assessee towards the construction of a new road was a capital expenditure and hence not allowable u/s 37(1), Income Tax Act, 1961 ? "

The facts giving rise to the reference applications are these. The assessee is a co-operative society and runs sugar mills at Panipat. During the accounting year ending June 30, 1968, relevant to the assessment year 1969-70, the assessee paid Rs. 3,490 through the Sarpanch, Gram Panchayat Gharaunda, for the construction of a new road known as Arian-pura, Chaura Link Road, constructed by the P.W.D., Karnal. This amount was claimed as a revenue expenditure, but the same was disallowed by the ITO though deduction for the same u/s 80G was allowed. The AAC, on appeal, affirmed the ITO''s order. On further appeal, the Tribunal came to the conclusion, "the assessee''s appeal for the assessment year 1965-66 was decided by us in ITA No. 130 of 1972-73, as per order dated April 2, 1974, and we had also held that Rs. 6,00,000 claimed by the assessee in that year was not an allowable deduction. The facts of this year are similar to the facts for the assessment year 1965-66. In this year also, the assessee made a contribution of Rs. 3,490 towards the construction of a new road. The commercial expediency in respect of this expenditure has not been established. In view of our aforesaid order, this amount has been rightly disallowed as (it was) capital expenditure". The learned counsel for the assessee referred to the Supreme Court judgment in L.B. Sugar Factory and Oil Mills (P) Ltd., Pilibhit Vs. Commissioner of Income Tax , U.P., Lucknow, but that is distinguishable. In the present case, a firm finding has been given by the Tribunal that the commercial expediency in respect of this expenditure has not been established. In view of this finding, the learned counsel for the assessee was unable to show how the said amount contributed for the construction of a new road was not rightly held to be a capital expenditure. Thus, the answer to question No. 1 is against the assessee and in favour of the revenue.

Question No. 2.

" Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to claim development rebate on the value of the new cooling coils ? "

The ITO as well as the AAC disallowed the claim of the assessee for Rs. 16,856 as development rebate. This expenditure was incurred on the installation of new cooling coils, a new process by which sugar crystals are now formed in 12 hours as against 36 hours before the introduction of this new process. On further appeal, the Tribunal relied upon Commissioner of Income Tax Vs. Indian Turpentine and Rosin Co. Ltd., and came to the conclusion that "under the Act of 1961, ''plant'' is defined u/s 43(3) ". Plant, in its ordinary sense, includes whatever apparatus is used by a businessman for carrying on his business. In our opinion, the assessee is entitled to the claim of development rebate on new machinery or plant worth Rs. 16,856. The term " plant " as defined u/s 43(3) of the Income Tax Act, 1961, reads :

"''Plant'' includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession. "

Thus, it is clear that the definition of the term "plant" is comprehensive enough and includes whatever apparatus is used by a businessman for carrying on his business. Thus, we find that the Tribunal was right in holding that the assessee was entitled to claim development rebate on the value of the new cooling coils. Hence, the answer to question No. 2 is in favour of the assessee and against the revenue.

The references are accordingly answered with no order as to costs.