TMI Blog1997 (8) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... be adopted and every day's delay should be construed not in a pedantic but in a pragmatic manner. It was submitted that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. It was, therefore, argued that the delay of 35 days be condoned and the assessee's appeal heard on merits. 2. The learned Departmental Representative submitted that the assessee's explanation was too vague to be accepted and that each day's delay had not been explained in this case. He objected to the delay being condoned. 3. After carefully considering the submissions of both the sides and taking a pragmatic rather than a pedantic view of the matter, we hereby condone the delay of 35 days and deal with the appeal on merits. 4. Ground No. 1(a) which is the main issue in this appeal challenges the confirmation of disallowance of depreciation on building, possession of which was taken by the assessee but title of the building was yet to be transferred. 5. The facts in brief are these. The assessee is a Private Limited Company having different Divisions, namely Engineering, Fertilizer, Project, Chemical Engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-1995 for assessment year 1990-91 in I.T.A. No. 89/Nag/92 following the Full Bench decision of the Kerala High Court in Parthas Trust v. CIT [1988] 169 ITR 334/38 Taxman 57 upheld. The order of the CIT (Appeals). It appears that no reference application has been filed against the Tribunal's order for assessment year 1990-91. 10. Shri Ganeshan took us through the various clauses of the agreement to sell an purchase executed on 19-2-1990. It was submitted that section 32 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') laid down that the property on which depreciation was claimed should be owned by the assessee and used for the purposes of the business. It was submitted that there was no doubt that the property in question had been used for the purposes of the assessee's business. As regards ownership, it was submitted that the term had not been defined in section 32 of the Act. It was submitted that section 22 of the Act used the same expression. It was submitted that if a particular property owned by the assessee was used for the purpose of any business then as per section 22 of the Act there would be no annual letting value. It was submitted that what was exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxman 226 of Rajasthan High Court in Maharani Yogeshwari Kumari v. CIT [1995] 213 ITR 541 and Saiffuddin v. CIT [1985] 156 ITR 127/23 Taxman 254, of Calcutta High Court in the case of CIT v. Steelcrete (P.) Ltd. [1983] 142 ITR 45/13 Taxman 24, CIT v. General Marketing Mfg. Co. Ltd. [1996] 222 ITR 574/86 Taxman 488 and of Patna High Court in Addl. CIT v. Sahay Properties Investment Co. (P.) Ltd. [1983] 144 ITR 357 and Andhra Pradesh High Court in CIT v. Shahney Steel Press Works (P.) Ltd. [1987] 165 ITR 399 and CIT v. Sahney Steel Press Works (P.) Ltd. [1987] 168 ITR 811, and disapproved the decisions of Bombay High Court in the case of CIT v. Zorostrian Building Society Ltd. [1976] 102 ITR 499 and Delhi High Court in CIT v. Hindustan Cold Storage Refrigeration (P.) Ltd. [1976] 103 ITR 455. 12. The learned counsel submitted that the judgments of the Allahabad High Court in the case of U.P. State Agro Industrial Corpn. Ltd. of Calcutta High Court in the case of Steelcrete (P.) Ltd. and of Andhra Pradesh High Court in the case of Shahney Steel Press Works (P.) Ltd. and Sahney Steel Works (P.) Ltd.'s case were in the context of section 32 of the Act. The learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental Representative further submitted that the Supreme Court had not disapproved the judgments of the Bombay High Court in Zorostrian Building Society Ltd.'s case and of Delhi High Court in Hindustan Cold Storage Refrigeration (P.) Ltd.'s case and that what the Supreme Court in the case of Podar Cement (P.) Ltd. had held was that the Bombay, Delhi and Andhra Pradesh High Courts had not correctly understood the ratio laid down in R.B. Jodha Mal Kuthiala. According to the learned Departmental Representative this did not amount to disapproving the entire judgment delivered by Bombay High Court or Delhi High Court or Andhra Pradesh High Court. 16. The learned Departmental Representative further submitted that the judgment of the Supreme Court in the case of Podar Cement (P.) Ltd. could also not be treated as an obiter dictum because nowhere in the judgment was even a vague reference made to section 32 of the Act and the entire discussion was on section 22 of the Act. 17. The learned Departmental Representative also submitted that the judicial opinion on the issue was divided but there was no decision of the Supreme Court on the issue nor of the jurisdictional High Court of Madh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the title of the property to another, the Delhi High Court in the case of Hindustan Cold Storage Refrigeration (P.) Ltd., Madras High Court in the case of CIT v. Tamil Nadu Agro Industries Corpn. Ltd. [1987] 163 ITR 61, Kerala High Court in the case of Parthas Trust, Rajasthan High Court in the cases of Golcha Properties (P.) Ltd. and Golecha Properties (P.) Ltd. case Golecha Properties (P.) Ltd. and Golecha Properties (P.) Ltd. and Orissa High Court in the case of Draupadi (P.) Ltd. have held that ownership must necessarily mean legal title to the asset in the assessee. There is no decision of the Supreme Court or of the Jurisdictional High Court of Madhya Pradesh on the issue. 19. The learned counsel for the assessee has placed complete reliance on the Supreme Court's judgment in the case of Podar Cement (P.) Ltd. in fact that decision is the sheet-anchor of his case. Reliance has been placed on the observations of the Supreme Court contained in para 25 of the said judgement which has been reproduced above. It was submitted that the Supreme Court have disapproved the decisions of the Bombay, Delhi and Andhra Pradesh High Courts and approved the decisions of the Allahabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this context that the decisions of the High Courts of Allahabad, Punjab Haryana, Rajasthan, Calcutta and Patna were approved and those of the High Courts of Bombay, Delhi and Andhra Pradesh were disapproved. In this context it may be mentioned that the Andhra Pradesh High Court decision which was disapproved was in the case of CIT v. Nawab Mir Barkat Alikhan 1974 Tax LR 90 in which the High Court held that when a vendor had agreed to sell his property and had received consideration thereof but had not executed a registered Sale Deed, his liability to pay tax on income from that property did not cease and his position as "owner" of the property within the meaning of section 9 of the Indian Income-tax Act, 1922 and section 22 of the Income-tax Act, 1961 did not thereby change. This decision of the Andhra Pradesh High Court had interpreted the Supreme Court's decision in the case of R.B. Jodha Mal Kuthiala in a particular manner and that interpretation was not approved by the Supreme Court in the case of Podar Cement (P.) Ltd. It is significant to note that the Andhra Pradesh High Court in the case of Shahney Steel Press Works (P.) Ltd. has otherwise held that for purposes of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lower Courts. But the question is whether the observations of the Supreme Court in para 25 of the judgment in the case of Podar Cement (P.) Ltd., lay down any obiter dictum. In our considered opinion, by no stretch of imagination can it be said that the Supreme Court has expressed any opinion by the way in respect of section 32 of the Act. In fact in the whole judgment there is not even a whisper of section 32. We, therefore, do not accept, the submission of the learned counsel for the assessee that the observations contained in para 25 of the above cited judgment lay down any obiter dictum from the Supreme Court. 23. The only decision by Full Bench of any High Court on the issue is of the Kerala High Court in the case of Parthas Trust. At page 346 of the report the Kerala High Court has observed that after anxiously considering the decision of the Supreme Court in R.B. Jodha Mal Kuthiala's case they are clearly of the view that the Supreme Court decision does not contain any principle or logic which would induce them to take a different view of the construction of section 32. It is also significant to note that the said decision of the Full Bench of the Kerala High Court was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in this case at all and hence no disallowance could be made u/s 37(4) read with section 37(5) of the Act. 31. The learned Departmental Representative relied on the impugned order. 32. We find substantial merit in the submissions of Shri Ganeshan. Section 37 excludes expenditure of the nature described in sections 30 to 36 of the Act. In other words, deduction in respect of specific items of expenditure mentioned in sections 30 to 36 has to be allowed under those sections while computing the business income of the assessee. Section 37 is only a residuary section. Section 30 stipulates that deduction in respect of rent, rates, taxes, etc., would be admissible under that section. A sum of Rs. 15,000 was paid by the assessee as rent of the building used as a guest house. The deduction was, therefore, admissible to the assessee under the specific provision contained in section 30 of the Act. As the special provision must override a general provision, section 37 which is a residuary section would not come into play so far as this item of expenditure is concerned. If section 37(1) does not come into play, the further exceptions called out under section 37(4) or sub-section (5) wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer at Rs. 4,28,68,614 would go up by an amount of Rs. 1,16,929 thereby entitling the assessee to higher deduction under sections 80HH and 80-I. It was submitted that since the matter had not been properly considered by the learned CIT(Appeals), the matter may be considered by him now or in the alternative the matter may be restored back to the Assessing Officer for proper adjudication. 37. The learned Departmental Representative relied on the orders of the authorities below. 38. Since there were no details regarding the disallowance, if any, under rule 6-D ascribable to the Urla Unit, we asked the assessee to furnish details as to how net profit of the Urla Unit had been computed at Rs. 4,28,68,614 in the first instance. The assessee was also required to substantiate its claim prima facie before a decision would be taken. The assessee could not satisfy at the time of hearing of the appeal. No details have been furnished immediately thereafter either. Since the orders of the lower authorities are silent on the issue and the assessee has not been able to prima facie substantiate its case, we dismiss the assessee's ground. 39. In the result the appeal is pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
