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TMI Blog1975 (4) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... e of sugar and machinery for sugar mills and other industries. During July, 1963, its managing director visited Japan in connection with the company's business. A deduction of Rs. 11,922 on account of expenses was hence claimed by the company. The ITO disallowed the company's claim primarily on the ground that this expense was of a capital nature because the tour to Japan was undertaken with a view to enter into a collaboration agreement with a Japanese firm for the setting up of a unit for the manufacture of cement machinery. The AAC upheld the ITO's finding on this point. On further appeal, the Income-tax Appellate Tribunal found on facts that the company had already manufactured and sold cement machinery worth a little less than a lakh of rupees and that the tour of the managing director was not undertaken for the purpose of entering into a collaboration agreement for setting up a new venture, but it was for, the purpose of improving upon the working of a venture already in existence, and for increasing its efficiency and output. The Tribunal, therefore, accepted the contention of the company that the amount claimed was a revenue expenditure. From these facts, the following ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio of Sayaji Iron Engineering Works Pvt. Ltd. v. CIT [1974] 96 ITR 240 (Guj) upon which reliance has been rightly placed by Mr. Sibal. Therein the Division Bench, on analogous facts, had concluded in the following terms (as p. 248): " In that view of the matter, therefore, we are of the opinion that the Tribunal was not justified in disallowing the proportionate claim of the assessee-company for the expenses incurred in connection with the trip abroad by its two directors and the production manager in connection with acquainting themselves with the technical know-how for manufacturing electric hoists on the ground that it was in the nature of capital expenses." I, therefore, return the answer to the question in the affirmative, that is, in favour of the assessee and against the revenue. The facts relevant to the second question claimed by the revenue may now be noticed. There was a company named the Indian Sugar and General Engineering Corporation Ltd., carrying on the business of manufacture and sale of sugar and repair of machinery and machinery parts, particularly sugar machinery. By an order dated the 28th September, 1962 (annex. A) of the Punjab and Haryana High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income-tax Act, 1961, for the assessment year 1965-66 ?" Inevitably, the controversy has to revolve around the provision of s. 41(1) and for facility of reference this may first be set down: " 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not." Now, the question that arises on the language of the abovesaid provision is whether the present assessee, Saraswati Industrial Syndicate Ltd., is chargeable to income-tax on the sum of Rs. 58,735, which, during the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h approval the following proposition : "...The word 'amalgamation' has no definite legal meaning. It contemplates a state of things under which two companies are so joined as to form a third entity, or one company is absorbed into and blended with another company. " The learned members of the Tribunal appear to me to have slipped into an error by importing into the concept of amalgamation, the nuances of the dissolution of a company by its winding-up. There is no manner of doubt that a winding-up order and a formal dissolution would put the corporate personality of a company to an end and from that point onwards it would become extinct. That, however, is not the necessary result of the amalgamation of two companies with each other under the court's order, as in the present case. The distinction between " dissolution by winding up " and " amalgamation ", therefore, is one of substance. Whilst in the former, there is a complete destruction of the corporate personality, in the latter there is a blending of the corporate personality of one with another corporate body and the continuance as such with the other. To equate winding-up and consequent dissolution and their legal results ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany, it would lose its corporate personality and there would remain no entity to discharge those liabilities and the amalgamated company would not be liable for the same. It is an elementary rule of general law and equity of the construction of statutes that the benefit and the burden of a legal result must go together. To me; it does not appear to stand to reason that the assessee-amalgamated company can have the benefit of the amount of Rs. 58,735 coming into its hands but not bear corresponding burden of the liability to pay tax thereon. The same results would flow from the concept that the amalgamated company indeed is a successor-in-interest of the amalgamating company and, therefore, entitled to both the assets and the liabilities thereof. Since the assets of both the companies merge and blend together to constitute the new company, it is both logical and equitable that the benefits and liabilities attaching thereto must, therefore, be saddled on the amalgamated company, that is, in the present case, the assessee. Learned counsel for the respondent-assessee had first placed reliance on CIT v. Hukamchand Mohanlal [1971] 82 ITR 624 (SC), for the contention that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany was allowable as a revenue expenditure ? " The Tribunal in disallowing the amount had relied on the decision of the Calcutta High Court reported as CIT v. Kawasaki Kisen Kaisha Ltd. [1970] 75 ITR 537 (Cal). Mr. Awasthy conceded that in the light of the Supreme Court decision reported in Indians Aluminium Co. Ltd. v. CIT [1972] 84 ITR 735 (SC), the view of the Tribunal cannot now be upheld. It, therefore, becomes the admitted position that so far as the property used for the factory and the business premises of the company are concerned, the property tax would be allowable as a revenue expense. An argument has, however, been raised by Mr. D. N. Awasthy that as regards the property which is occupied by the workmen of the factory, the property tax in regard thereto cannot be allowed as a revenue expense. It was suggested that the provision of housing as quarters for the workers was not intimately connected with the carrying on of the business and, therefore, expenses in regard thereto cannot be claimed as a permissible deduction. I am unable to agree. Perhaps in the early nineteenth century, when the doctrine of laissez-faire was at its height, it might have been possible t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, "employees' quarters" are in terms accepted by the statute, as being used for the purposes of the business and profession of the assessee. Once that is so, one fails to see why the same employees' quarters would not be within the ambit of being wholly or exclusively for the purposes of the business or profession under s. 37(1) of the Act. It deserves high-lighting that in the case of the present assessee itself, the revenue has throughout allowed depreciation on these very employees' quarters. A reference to the assessment order itself would show that rateable deduction has been given depending on the fact whether the employees' quarters were of the first, second or third class, apart from depreciation on the factory buildings and the offices and godowns attached thereto. As noticed above, both on principle and in the light of the statutory provision, it appears manifest that the provision of housing for the labour of the industry must be viewed as directly and intimately connected with the carrying on of the same and is, therefore, exclusively for the purposes of the business or profession carried on by the assessee. Nevertheless if precedent is needed for the proposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied by them. The ITO treated this amount as income of the assessee and his decision was upheld by the AAC. The Tribunal also agreed with them by holding that such receipts were trading receipts. From these facts, the following question has been formulated : " Whether, on the facts and in the circumstances of the case, the amount of Rs. 83,317 recovered as bond penalty from the cultivators and shown on the liabilities side of the balance-sheet was a trading receipt liable to be included in the assessable income ? ". Learned counsel for the assessee has been unable to show any flaw in the reasoning of the Tribunal or the authority below it. Indeed, the matter was not very seriously pressed on behalf of the assessee on this question. 1, accordingly, return the answer to the question in the negative, that is, in favour of the revenue and against the assessee. The assessee-company had claimed extra shift allowance on plant and machinery on the basis of its working an engineering unit for 210 days as double shift and for 94 days as triple shift. In respect of its sugar factory, the claim was for working triple shift for 118 days. In allowing extra shift allowance on additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on which depreciation, extra shift allowance and development rebate were admissible ? " Now, there is no dispute here that the relevant equipment purchased by the company is directly and intimately connected with the running of its factory. A reference to the enumerated loose tools and implements in this context would show that these are obviously required for the working, maintenance and repair of the industrial establishment. The sole issue that, therefore, arises is whether these loose tools and implements are within the ambit of the word " plant or machinery ", as used in the statute. Mr. Sibal, on behalf of the assessee, did not contend that these loose tools could appropriately come within the ambit of the word "machinery ". The matter is thus put in a narrower compass and it is only to be determined whether the word " plant " would adequately cover this equipment. It is unnecessary and indeed inappropriate to go back to the dictionary meaning of the word " plant". This is so because the statute had given an extended meaning to the same by virtue of the definition in s. 43(3) of the Act which is in the following terms: " 43. (3) 'Plant' includes ships, vehicles, books ..... 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