2005 (3) TMI 26 - HC - Income Tax

1. Whether, was right in law in holding that the amount of ₹ 82,42,876 being the excess levy sugar price was not taxable in the hands of the assessee-company in the year under consideration? 2. Whether was right in law in deleting the disallowance of ₹ 5,80,098 on account of interest on excess levy price charged by the assessee? 3. Whether Tribunal was right in law in directing the Income-tax Officer to allow depreciation in the case of the trailers at the rate admissible in the case of transport vehicles even though the trailers are not motorized vehicles? - it is clear that the trailer is a motor car and is used for both the purposes, namely, carrying of passengers and goods. Therefore, it will fall within the category of motor lorries. The Tribunal was right in allowing depreciation at the rate of 30 per cent, treating it to be a transport vehicle - we answer questions Nos. 1 and 3 referred to us in the affirmative, i.e., in favour of the assessee and against the Department and question No. 2 in the negative, i.e., in favour of the Revenue and against the assessee

Summary

Issues:
1. Taxability of excess levy sugar price in the hands of the assessee-company.
2. Disallowance of interest on excess levy price charged by the assessee.
3. Allowability of depreciation on trailers.

Analysis:

*Issue 1: Taxability of Excess Levy Sugar Price*
The case involved the excess levy sugar price of Rs. 82,42,876 collected by the assessee, which was claimed as not taxable. The Tribunal, based on previous findings, ruled in favor of the assessee, stating that the excess levy sugar price did not form part of trading receipts and hence was not taxable. The court referred to the Levy Sugar Price Equalisation Fund Act, 1976, which required transferring excess sugar price to the fund with interest. The court held that the excess levy sugar price was not taxable and the interest liability did not accrue during the relevant previous year. The judgment favored the assessee on this issue.

*Issue 2: Disallowance of Interest on Excess Levy Price*
The Tribunal had deleted the disallowance of Rs. 5,80,098 on account of interest on the excess levy price charged by the assessee. The court upheld the Tribunal's decision, stating that the interest liability did not accrue during the relevant previous year. Therefore, the judgment was in favor of the assessee on this issue.

*Issue 3: Allowability of Depreciation on Trailers*
The issue revolved around whether trailers qualified for depreciation at the rate applicable to transport vehicles. The court analyzed the definition of "motor car" and "trailer" under the Motor Vehicles Act, 1939, concluding that a trailer falls within the category of a motor vehicle and can be considered a transport vehicle. As trailers are used for carrying goods and passengers, the court agreed with the Tribunal's decision to allow depreciation at the rate applicable to transport vehicles. Hence, the judgment favored the assessee on this issue.

In conclusion, the court ruled in favor of the assessee on the taxability of excess levy sugar price and the allowability of depreciation on trailers. However, the disallowance of interest on excess levy price was upheld in favor of the Revenue. The judgment provided a detailed analysis of each issue, citing relevant legal provisions and past decisions to support the conclusions reached.