2005 (1) TMI 80 - HC - Income Tax

Extra-shift allowance on plant and machinery leased out - Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the appellant was not entitled for the claim for extra-shift allowance on plant and machinery leased out when it is eligible for normal depreciation? - Tribunal was not correct in holding that the assessee is not entitled to claim extra-shift allowance on the plant and machinery leased out - We answer the question referred to us in the negative and in favour of the assessee and against the Revenue.

Summary

Issues:
1. Entitlement to extra-shift allowance on leased plant and machinery.
2. Jurisdiction of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961.

Issue 1: Entitlement to extra-shift allowance on leased plant and machinery:

The case involved the question of whether the assessee, engaged in leasing business, was entitled to claim extra-shift allowance on machinery leased out, in addition to normal depreciation. The Assessing Officer initially allowed the claim for extra-shift allowance based on certificates from lessees. However, the Commissioner of Income-tax, invoking revisional power under section 263 of the Act, directed withdrawal of the allowance citing a Delhi Tribunal decision. The Income-tax Appellate Tribunal upheld the Commissioner's order, stating that the assessee was not entitled to the extra-shift allowance. The assessee challenged this decision, arguing jurisdictional grounds and the correctness of the allowance denial. The Tribunal rejected both contentions, emphasizing that the Commissioner properly exercised jurisdiction and that the allowance was prejudicial to Revenue interests. The High Court considered a Karnataka High Court decision and its affirmation by the Supreme Court, which held that an assessee leasing out machinery is entitled to claim extra-shift allowance. The High Court, bound by the Supreme Court decision, ruled in favor of the assessee, stating that the Tribunal was incorrect in denying the allowance.

Issue 2: Jurisdiction of the Commissioner of Income-tax under section 263:

The jurisdiction of the Commissioner of Income-tax under section 263 was also a key issue in this case. The assessee challenged the Commissioner's order on jurisdictional grounds, contending that the order to withdraw the extra-shift allowance was erroneous. The Tribunal upheld the Commissioner's jurisdiction under section 263, emphasizing that the order was correct as it benefited the assessee more than allowed. However, the High Court, while acknowledging the Tribunal's decision on jurisdiction, primarily focused on the entitlement to extra-shift allowance. The High Court's ruling in favor of the assessee on the allowance issue impliedly accepted the Commissioner's jurisdiction under section 263 but did not delve into a detailed analysis of the jurisdictional aspect due to the conclusive resolution based on the entitlement issue.

In conclusion, the High Court's judgment primarily centered on the entitlement of the assessee to claim extra-shift allowance on leased plant and machinery, relying on a Supreme Court decision affirming a Karnataka High Court ruling. The ruling favored the assessee, emphasizing the binding nature of the Supreme Court decision and overturning the Tribunal's denial of the allowance. The judgment indirectly acknowledged the Commissioner's jurisdiction under section 263 but did not extensively address this aspect due to the conclusive resolution of the entitlement issue in favor of the assessee.