TMI Blog1991 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the relevant previous year? 4. Whether the Tribunal was right in holding that the provision of Rs. 65,76.148 representing differential excise duty and consequent increase in sales tax which would be payable in the event of the Excise Department succeeding in its claim that the excise duty payable by the manufacturers was to be computed with reference to the assessee's selling price and not with reference to the price at which the manufacturers sold their goods to the assessee was not allowable as deduction ?" The following question has been referred at the instance of the Department : "Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 36(1)(iv) read with the I. T. Rules 87 and 88 and the Board's Notification No. S.O. 3433 dated 21-10-1965, the Tribunal was correct in law in allowing the assessee's appeal holding that the assessee is entitled to the entire amount of Rs. 50,79,655 being the initial contribution made to the approved super annuation fund as a deduction as against Rs. 8,12,745 allowed by the Income-tax Officer ?" A few of the questions are admittedly concluded by the decision of the Supreme Court or of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f electrical goods and is an industrial company. The canteen has to be maintained for the purposes of providing facilities for food to the employees who are engaged in such establishment. Dr. Pal contends that the canteen undoubtedly is for the purposes of the business which the assessee is carrying on, viz., the business of manufacture and production of articles and things. If a computer is installed for the purposes of monitoring the business of the company, investment allowance is allowed to such computer. Labourers are employed in the business. The canteen has to be provided for them which is for the purposes of the business. According to learned counsel, the plant and machinery used in the canteen is for the business of manufacture or production. He has also submitted that the expression 'for the purpose of business" is wider in scope than the expression 'for the purpose of earning profits". Its range is wide : it may take in not only the day-to-day running of a business but also the rationalisation of its administration and modernisation of its machinery ; it may include measures for the preservation of the business and for the protection of its assets and property from expro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt installed thereat. It is the business of Sky Room to run the restaurant. The canteen which is run by the assessee-company cannot be said to be for the purpose of the business of the assessee of producing articles or things. The assessee is engaged in the manufacture of electronic goods and equipment and by no stretch of imagination can it be said that running of the canteen for its employees is for the purpose connected with the assessee's business of manufacture and production of electronic articles and equipment. In our view, the plant and machinery which are eligible for investment allowance must be such plant and machinery which are being used for the purpose of manufacture or production of any article or thing, which is the business of an assessee. Even if a factory has to maintain a canteen, it cannot be said that it is an integral part of manufacture or production carried on by the assessee. The canteen building may be part of the factory for the purpose of claiming depreciation but because the canteen building is held to be part of the factory, it does not follow that the equipment used in the canteen must necessarily be eligible for investment allowance. For the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal confirmed the orders of the lower authorities and dismissed the assessee's appeal by observing that the liability claimed by the assessee is only a contingent liability. The Tribunal took into consideration the balance-sheet of M/s. Electric Lamps Mfg. Co. (India) Ltd. for the year 1977-78, where it has been shown that there is a contingent liability for excise duty and it has further been indicated that, in the event of the liability actually materialising, depending upon the outcome of the suit now pending, the said amount will be paid by the company and thereafter recovered from the customers, pursuant to specific agreements with them. Therefore, it is clear that this statutory liability was of the manufacturers and it was recoverable only from the assessee-company. At the hearing before us, Dr. Pal contended that the differential excise duty which may be realised from the assessee-company in the event it is imposed on the manufacturers is a statutory liability it is not a contingent liability even though it was disputed by the manufacturers before the court. He has also contended that there was an agreement between the assesseecompany and the manufacturers to the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1944, the assessee was entitled to deduction in computing its income as it was maintaining its accounts on the mercantile system of accounting. In CIT v. J. K Synthetics Ltd. [1983] 143 ITR 771 (All), the assessee had made a provision for payment of excise duty in the assessment year 1967-68. It, however, disputed the liability before the Allahabad High Court which decided the dispute in favour of the assessee. The Excise Department went up in appeal before the Supreme Court and the dispute was pending before the Supreme Court at the time of assessment of the assessee's income for the said assessment year 1967-68. The Income-tax Officer held that, as it had been decided by the High Court that the assessee was not liable for payment of excise duty, no deduction was allowable in respect of the provision made for payment of excise duty in computing its income. On appeal to the Appellate Assistant Commissioner, the assessee contended that as the excise authorities had taken the matter in appeal before the Supreme Court, the assessee was entitled to claim the deduction in respect of the provision made in the assessment year 1967-68. The Appellate Assistant Commissioner accepted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's writ petition on February 5, 1968. We have considered the arguments. The balance-sheet of Electric Lamp Manufacturing Co. (India) Ltd. as on June 22, 1978, has been shown to us. The following note appears under Schedule 'A' to the said balance-sheet: "1. Contingent liability for (b)." It appears that a letter was written by the assessee-company to Electric Lamp Manufacturing Co. (India) Ltd. on November 19, 1973, to the following effect : "We refer to your letter of October 23, 1973, and would confirm that in the event of your becoming liable to pay Central excise duty on products sold to us at amounts higher than what you have charged on your bills, we will pay you the differential amount within seven days of the receipt of your demand." The assessee-company also wrote a letter to Hind Lamps Ltd. to the following effect: "During the period October 1, 1975, to June 30, 1979, we Peico Electronics and Electricals Ltd., have purchased from you electric lamps. On these purchases, you have paid excise duty on the basis of your selling prices to us. In the event, the excise authorities levy and call upon you to pay higher duty for the aforesaid purchase of electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of excise duty was concerned at the material time. Even if it is assumed that there is an agreement on the part of the assessee to share the liability, it was only when it will be levied upon the manufacturer that the excise duty can be recovered from the assessee-company. There was no liability or obligation of the assessee-company to the Excise Department for the excise duty. It is not a statutory liability of the assessee. Unless the liability for differential excise duty was co-existent with that of the manufacturer, it cannot be treated as accrued liability of the assessee. Even if it is a contractual liability of the assessee arising out of the transactions which the assessee had with the aforesaid two manufacturers, such contractual obligation will be dischargeable by the assessee only if the manufacturers are liable to bear the liability and demand it from the assessee-company. The manufacturers are responsible to the Excise Department for payment of differential excise duty, if any, levied. That is precisely the reason why the High Court directed the manufacturers to furnish bonds to the satisfaction of the Excise Department till the matter was decided. However, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. asked for declaration that notifications levying additional duty equivalent to excise duty on articles imported into India are violative of articles 14, 19(1)(g) and 265. They also claimed refund. The Gujarat High Court held that the writ petitioner cannot be said to be strangers although no refund as prayed for could be granted to the petitioner. This decision does not lay down that a consumer is liable to pay the additional levy directly. The Excise Department has to proceed against the manufacturer for recovery of the additional duty, if legally levied. Whether the manufacturers, in turn, will be able to recoup it from the purchaser is a matter which will depend on the agreement by and between the manufacturer and purchaser. It cannot be a levy on the purchaser. Dr. Pal has also referred to the case of Hind Lamps Ltd. v. Union of India [1978] 2 E.L.T. J-78. There the central excise authorities raised the plea that Hind Lamps Limited is a company under the complete control of the customer companies. One of the six customer companies is the assessee in the present reference, the customer amongst others (i.e., the assessee-company in the present reference), would be a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
