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TMI Blog1966 (2) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter referred to as B.R.C. Mills, was at the material time doing the business of running a textile mill in which it was manufacturing yarn and cloth and selling it. The managing agents of B.R.C. Mills are B.R. Sons Ltd. Originally a group of persons called the Gupta Group had acquired a large block of shares of Mayer Mills Ltd. That mill was also doing textile business. This business, since some time before the relevant assessment years, is being carried on by the assessee, B.R.C. Mills. A substantially large block of shares of the B.R.C. Mills is held by the Gupta Group. In the original assessment for the assessment year 1949-50, the assessee in its return filed on 24th January, 1950, claimed to deduct a sum of over ₹ 12 lakhs on account of depreciation, including initial, additional and extra shift depreciation on depreciable assets including certain machinery. The machinery in relation to which depreciation has been claimed includes also machinery which in the reassessment proceedings was claimed by the assessee to have been purchased from another limited company, viz., Laxmiratan Engineering Works, for brevity's sake, hereinafter referred to as L.R.E. Works. Now th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After taking necessary steps, the Income-tax Officer on 17th March, 1953, reopened the assessment for the year 1949-50 under section 34 of the Act. In the return filed in the reassessment proceedings also the B.R.C. Mills claimed depreciation in respect of the aforesaid machinery alleged to have been purchased from the L.R.E. Works under section 10(2)(vi) and section 10(2)(via). The case put forward by the B.R.C. Mills before the Income-tax Officer as well as before the Appellate Assistant Commissioner was that after it purchased the machinery from the L.R.E. Works, the details of which it had supplied, the B.R.C. Mills leased it back to the L.R.E. Works. The assessee further pleaded that the lease of the machinery by it to the L.R.E. Works was oral till 1st October, 1950, and for the period subsequent to that was under a written lease agreement of date 13th March, 1953, registered on 8th July, 1953. According to the assessee, though the agreement was executed on 13th March, 1953, it, as its terms disclose, was operative from 1st October, 1950. It may at this stage be stated that in the assessment proceedings of the subsequent two years the assessee had claimed depreciation in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther held that the Supreme Court decision had no application to the facts of the case. This is how the Tribunal has distinguished the Supreme Court case from the facts of this case in its appellate order: In that case (Supreme Court decision), a plant for dyeing silk yarn was actually purchased by the said mills as a fixed asset for the purpose of manufacturing silk cloth and it was used by it for that purpose for several years. It was owing to difficulty in obtaining silk yarn that it could not make use of that plant temporarily and, hence, it was let out to a person on monthly rent. It is in respect of this machinery that the assessee claimed depreciation. The Supreme Court allowed the claim on the ground that in the circumstances the assessee had exploited the dyeing plant to its best advantage. Distinguishing the case, the Tribunal held that in the present case, on the assessee's own admission, the machinery was not acquired by the assessee as a fixed asset for the purposes of its own business, but was secured by it as an investment made out of the surplus funds and that the engineering machinery at no time before the alleged lease to L.R.E. Works was used by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions: 1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in declining to permit the assessee to argue its claim to depreciation allowance under section 12(3) of the Income-tax Act? 2. In case the answer to question No. 1 is in the affirmative, whether the company is entitled in law to depreciation on the machinery purchased from Messrs. Laxmiratan Engineering Works Ltd. under section 12(3) in the present case? We would first proceed to consider the first question. Mr. Mehta, learned counsel for the assessee, contends that the Tribunal was in error in not permitting the assessee to argue his case under section 12(3). The assessee was not making out a new case in claiming that he was entitled to depreciation under section 12(3). The assessee was only calling in aid the said provision of the Act in support of his contention that he was entitled to depreciation allowance on the facts pleaded by him. Mr. Joshi, learned counsel for the revenue, on the other hand, contends that the assessee was claiming depreciation under section 10(2)(vi) and section 10(2)(via) and this was his case before the Income-tax Officer as well as before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Officer and the Appellate Assistant Commissioner the assessee was calling in aid or relying upon the provisions of section 10(2)(vi) and section 10(2)(via) in support of its claim for depreciation of machinery, the facts on the basis of which this claim was advanced were that the machinery which formerly belonged to L.R.E. Works had been purchased by the assessee from the L.R.E. Works and that this machinery had been leased out by the assessee to the L.R.E. Works during the three assessment years. As the order of the Tribunal indicates, the claim under section 10(2)(vi) and section 10(2)(via) on the basis of these facts was put forward by the assessee on the strength of the decision of their Lordships of the Supreme Court in Commissioner of Excess Profits Tax v. Shri Lakshmi Silk Mills Ltd. [1951] 20 I.T.R. 451 (S.C.) It is true that the case had no application to the facts of the present case and the Tribunal was right in holding in paragraph 9 of its judgment that the case was distinguishable on facts and has no application to the facts of the present case. But none the less the fact remains that throughout the assessee's case has been that it had purchased this mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the machinery and whether the assessee has leased out the machinery to somebody else in the year of account. But then that had been the case of the assessee throughout. Mr. Mehta stated before us that the Tribunal was not asked nor was any request made that any additional evidence be permitted to be led by the assessee. The assessee had only made a request that the Tribunal should consider whether the assessee is entitled for a deduction under section 12(3) of the Act on the material which was already on record. It is true that the contention of the assessee that it was entitled for depreciation under sections 10(2)(vi) and 10(2)(via) was decided by the Tribunal without deciding the questions of fact arising on the case pleaded by the assessee. The Tribunal has decided the claim of the assessee for depreciation under sections 10(2)(vi) and 10(2)(via) on the basis of the concession made by the counsel on behalf of the assessee that the engineering machinery now under consideration was not used for the purpose of the assessee's textile mills business in the sense in which other machinery, buildings, etc., was used, and that being so the decision of the Tribunal had not proceede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground. Rule 29 provides: The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause...the Tribunal may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced. It would be noticed that what a party is not entitled to do before the Tribunal, without first obtaining the leave of the Tribunal, is to urge a ground which it had not mentioned in the grounds of appeal, or to lead additional evidence, either documentary or oral or by way of filing affidavits. Turning to the facts of the present case, it is not that the appellant had not raised this ground in the memorandum of appeals for all the three years. In the statement of the case the Tribunal has stated that such a ground was raised. The reason which the Tribunal has given ..... X X X X Extracts X X X X X X X X Extracts X X X X
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