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2019 (8) TMI 735

..... LTD. [1965 (2) TMI 110 - PUNJAB HIGH COURT] after referring to the Circular issued by the Board as published in Page 447 of the Income Tax Manual Part III, 10th Edition, held that the premises where the employees were housed, for which, they paid rental the company were in the near vicinity of the mills, that the rental of those premises were fixed and did not change with the change of the occupant, that the rental deducted from the wages of the employee or employees occupying the premises, that those employees were engaged in the main business of the company and their residence in the buildings in dispute was incidental to the main occupation i.e. the carrying on of the business of the company and that in true perspective, those buildings were part of the business equipment of the owner or in other words, it was the business asset of the owner. The above legal position will squarely apply to the facts of the present case. Tribunal rightly held that there was no such restriction in the Circular issued by the Board stating that the benefit would accrue to the assessee only if the residential accommodation is situated within the factory premises. Furthermore, the said Circular does n .....

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..... the business of manufacture and sale of vehicles. For the assessment year under consideration, the assessee claimed depreciation on 5 residential flats plus undivided share of land at 10%, which the Assessing Officer restricted to 5%. The assessee also claimed relief under Section 80HHC of the Act on the basis of book profits since the income was computed under Section 115JA of the Act and not as per the normal computation. The Assessing Officer held that the relief under Section 80HHC of the Act could only be calculated on the actual profits and not on the book profits. 5. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-7, Chennai. However, the appeal was dismissed by order dated 29.8.2005. As against that, the assessee preferred further appeal before the Tribunal. After placing reliance on the circular issued by the Board dated 12.12.1996, the Tribunal held that the quarters built for the employees of the company must be regarded as being used for the business of the company and that the assessee was entitled to 10% depreciation. The Tribunal also held that when the assessment was on the basis of book profits, export incent .....

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..... mployee of the property owned by the employer is subservient to and necessary for the purpose of their duties. It is considered that what applies to buildings applies also to the fans, air- conditioners and refrigerators fitted to those buildings, as those are amenities which virtually form part of such buildings. 3. On reconsideration therefore the Board have decided, in super session of the instructions issued in their letter dt. the 29th Feb., 1964, that fans, airconditioners, refrigerators etc. provided by the employer at the residence of the employees should be considered to have been used wholly for the purpose of the employer's business and full depreciation as may be admissible in accordance with the rules, should be allowed in the assessment of the employer. Where such assets have been installed on or before the 31st March, 1965, development rebate may also be allowed in respect of these assets, if the rebate is otherwise admissible. 9. On a reading of the said Circular, it is seen that there is a reference to the earlier Circular/Instructions dated 21.3.1960, in which, it was clarified that the quarters built by the employers for the accommodation of their employees m .....

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..... from the wages of the employee or employees occupying the premises, that those employees were engaged in the main business of the company and their residence in the buildings in dispute was incidental to the main occupation i.e. the carrying on of the business of the company and that in true perspective, those buildings were part of the business equipment of the owner or in other words, it was the business asset of the owner. The above legal position will squarely apply to the facts of the present case. 12. We have gone through the reasons assigned by the Tribunal and we find that the Tribunal rightly held that there was no such restriction in the Circular issued by the Board stating that the benefit would accrue to the assessee only if the residential accommodation is situated within the factory premises. Furthermore, the said Circular does not restrict the benefit only if the accommodation is provided to all the employees, which, obviously, is a business expediency and it is not for the Assessing Officer to sit in the arm chair of the assessee to decide as what would be best for their employees. Thus, the first substantial question of law is required to be answered against the Re .....

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..... 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business. The judgment of the Tribunal has been upheld by the High Court.? 14. An identical question was considered by us in the case of CIT Vs. Sundaram Brake Linings [TCA.Nos.1351 to 1353 of 2008 dated 11.9.2018]. In this decision, we referred to the decision rendered by us in the case of CIT Vs. Bannari Amman Sugars Limited [TCA.No.163 of 2009 dated 30.7.2018], the decision of the Hon'ble Supreme Court in the case of Ajanta Pharma Ltd. Vs. CIT [reported in (2010) 327 ITR 305] and the decision of the Hon'ble Supreme Court in the case of Bhari Information Technology Systems Private Limited and answered the question against the Revenue. We also noted the decision of the Division Bench in the case of CIT Vs. M/s.Three Bags India Private Limited [reported in 2016 SCC Online Madras 27408]. 15. In the light of the above legal position having been settled on the above lines, the second substantial question of law is also required to be answered against the Revenue and is accordingly answered against the Revenue. 16. In the result, the above tax ca .....

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