TMI Blog1996 (5) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... w the E.S.A. on the above basis. The department is now in appeal before us. 5. Both sides have argued before us with a considerable learnings and erudition. The department has relied on the following :--- 1. South India Viscose Ltd.'s case ; 2. Anantapur Textiles Lid. v. CIT [1979] 116 ITR 851 (Cal.) ; 3. Raza Sugar Co. v. CIT [1970] 76 ITR 541 (AU.) ; 4. Kundan Sugar Mills v. CIT [1977] 106 ITR 704 (All.) ; and 5. Kerala Financial Corpn. v. CIT [1994] 210 ITR 129/75 Taxman 573 (SC). 6. On the of her hand, the learned counsel for the assessee has relied on the following : 1. C.B.D.T. Instruction No. 1605 dated 26-2-1985 ; 2. Sriram Bearings Ltd. v. CIT [1993] 199 ITR 579 (Cal.) ; 3. K.P.Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 (SC) ; 4. Navnit Lal C. Javeri v. K. K. Sen, AAC [1965] 56 ITR 198 (SC) ; and 5. Kichna Sugar Co. Ltd. v. CST [1995] UPTC 1028. 7. We will now proceed to analyse the arguments of the two sides and the impact of the above judgments. 8. We will commence with the decision in South India Viscose Ltd.'s case relied upon by the learned departmental-representative, at Sl. No. 1 above. It will take care of the decisions at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew. 11. Thereafter Central Board of Direct Taxes issued Instruction No. 1605 dated 26-2-1985, taking notice of the above decisions and directing that grant of extra shift allowance for plant and machinery be calculated not with reference to the number of days each machinery and plant had worked but with reference to the working of a factory. The relevant extract is given below : " Subsequently, the Allahabad High Court in Kundan Sugar Mills v. CIT [1977] 106 ITR 704, the Calcutta High Court in the case of Anantapur Textiles Ltd. v. CIT [1979] 116 ITR 851 and lately the Madras High Court in South India Viscose Ltd. v. CIT [1982] 135 ITR 206 have held that extra shift allowance would be admissible with reference to the number of days on which the particular machinery or plant has worked extra shift and not on the basis of the working of the concern. It may be mentioned that Board's letter dated September 28, 1970, and the circular No. 109 dated March 20, 1973, have not been cited before these Courts and, therefore, had not been considered by them. Receipt audit has been raising objections on the basis of these decisions where the Assessing Officers had allowed extra shift allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 82 ITR 913 that circulars issued by the C.B.D.T. under section 119 of the Act are binding on all officers and persons employed in the execution of the Act [binding on all officers and persons employed in the execution of the Act] even if they deviate from the provisions of the Act. Emphasis supplied 14. The learned counsel for the assessee further strengthened his argument relying on a decision of the jurisdictional High Court in the case of Kichna Sugar Co. Ltd. It may be noted that the judgment was delivered on 23-12-1994. Here also the learned counsel for the revisionist contended that the circular issued by the Commissioner of Sales-tax was binding on the authorities, whereas the learned standing counsel contended that the circular was against the provisions of the Sales-tax Act and, therefore, it was not binding on the Assessing Officer. For this proposition he placed reliance on a judgment of the Hon'ble Supreme Court in Bengal Iron Corpn. v. CTO [1993] UPTC 1312. Faced by different judgments of the Hon'ble Supreme Court taking contrary views, their Lordships held that the judgment of the Hon'ble Supreme Court in Navnit Lal C Javeri's case which was a five Judges Bench, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgments were again followed by the Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597 in which it was observed as under : ' But the construction is commending itself to us does not rest merely on the principle of contemporanea expositio. The two circulars of the C.B.D.T. to which we have just referred are legally binding on the revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of sub-section (2) and they depart or deviate from such construction. It is now well settled as a result of two decisions of this Court, one in Navnit Lal C Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 and the other in Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 that circulars issued by the C.B.D.T. under section 119 of the Act are binding on all officers and persons employed in the execution of the Act even if they deviate from the provisions of the Act.' Thus, it has been the consistent view of the Supreme Court that beneficial circulars that explain the legal position or otherwise mitigate the rigour of law are binding on the authorities administering the taxing statute. Therefore, in view of the judgment of a la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot override the provisions of the Act ; that would be destructive of all the known principles of law as the same would really amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament. Such a contention cannot seriously be even raised." 16. After careful consideration we find that although the judgment of the Hon'ble Supreme Court in the case of Kerala Financial Corpn. was delivered on 12-5-1994, it was not brought to the notice of the Hon'ble Allahabad High Court in the case of Kichna Sugar Ltd., though it was delivered on 23-12-1994. In the case of Kerala Financial Corpn. a distinction has been made between the word ' deviate ' as used in the case of K.P. Varghese as well as Navnit Lal C Javeri, and the words ' override ' and " detract from ". It has been specifically clarified that the Hon'ble Supreme Court did not mean in the case of K.P. Varghese that circulars can override any provision of the Act or detract from the Act. Thereafter in concise but powerful words, the Supreme Court held that the directions under section 119 of the Income-tax Act, 1961 cannot override the provisions of the Act ; that would be destructive of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in computing the income chargeable under the head " Profits and gains of business computation ". The dispute before us is not the same. In the circumstances the case relied upon by the department is not at all applicable. 21. On the other hand, the decision on the case of Asbestos Cement Ltd. is directly applicable. It was held therein that reimbursement of medical expenses of director/employees were not covered by section 40(c) and were not perquisites for section 40A(5) of the Act. Respectfully following the decision, we reject this ground of appeal of the department. 22. The last dispute relates to the question whether investment allowance can be given on water coolers. 23. The Assessing Officer noticed that investment allowance had been claimed on cost of water coolers Rs. 14,374. He made a remark that water coolers were office appliances on which investment allowance could not be allowed. The claim was rejected. 24. The CIT (Appeals) was informed during appeal by the assessee that the water coolers were installed in factory premises. In view of this submission he directed that investment allowance should be allowed as a deduction as per law. The department objects ..... X X X X Extracts X X X X X X X X Extracts X X X X
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