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TMI Blog1989 (7) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... ive floor in a building in which the assessee's registered office was situated and had also installed air-conditioners for the proper working of the computers. The total amount spent was Rs. 80,68,931 and had claimed additional depreciation under s. 32(1)(ii)(a) as they were part of the plant and machinery installed during the assessment year. The IAC rejected the claim on the ground that both these items of plant and machinery were installed in the office premises and, therefore, additional depreciation on them would not be admissible in view of cl. (a) of the proviso to s. 32(1)(ii). The CIT(A) had confirmed the said disallowance on the very ground that the items of plant and machinery had been installed in the office premises. 5. The learned counsel for the assessee stressed that mere fact that the floor in the administrative building, in which the computers and the air-conditioners were installed, did not mean that they were part of the office premises. He further developed his arguments that the meaning the words 'office premises' should have been taken as understood in the commercial parlance with reference to the use of the particular premises. He relied on the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. The very idea of inserting this provision was to encourage and stimulate the investment. This being the intention of the legislature, the insertion of the cl. (ii)(a) has to be interpreted liberally, with that idea in view. 7. In this particular case, it is not disputed that the computers and, the air-conditioners meant for the proper performance of the computers, were plant and machinery installed a new in this assessment year. The very sentence rejecting the claim of additional allowance shows that the IAC himself has mentioned that both the items of plant and machinery are installed in the office premises and, thus, will not be admissible in view of cl.. (a) of the proviso to s. 32(1)(ii)(a). This goes to establish that, admittedly, the computers and air-conditioners were nothing but plant and machinery and additional allowance was only disallowed because they were installed in the office premises. The words 'office premises' have been defined by the Calcutta' Bench of the Tribunal, in the case cited supra, that these words should be taken as they are understood in common parlance with reference to the use of the particular premises. Any premises, or a part thereof, init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory, should be allowed as a deduction while computing total income, in view of the specific provisions of s. 43B of the IT Act, 1961. 11. In this case, admittedly, the entire excise duty paid by the assessee during the year has been allowed by the IAC while computing the total income of the assessee. While valuing the closing stock, the assessee claimed that the cost of the closing stock should be calculated after deducting the Excise duty on the said stock as paid by the assessee. He relied on the decision of Gujarat High Court in the case of Lakhanpal National Ltd. vs. ITO (1986) 54 CTR (Guj) 241 : (1986) 162 ITR 240 (Guj). The learned counsel stressed that if the Excise duty paid on closing stock was calculated towards the cost of the closing stock, then it indirectly meant that that much part of the Excise duty stood disallowed and which, in view of the decision of the Gujarat High Court, should have been allowed. On the other hand, the Departmental Representative relied on the order of the CIT(A). 12. We have heard the parties at length and have also carefully perused the entire facts on record. It is not in dispute in this case that the entire excise duty paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of Rs. 8,44,27,279 which had been realised by the assessee in the last quarter of the year and the said amount had been credited in the sales-tax account and had not brought the said amount under the P L A/c. The IAC added the said amount under s. 43B towards income on the ground that this liability of tax not being paid by the assessee during the assessment year cannot not be allowed to be deducted from the total income. 15. It was stressed by the learned counsel for the assessee before us that interpretation of the law by the IAC and the subsequent confirmation of the said order by the CIT (A) was not justified in the eyes of the law. He further stressed that s. 43B provided that any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, shall be allowed only in computing the income referred to in s. 28 of the previous year in which such sum was actually paid by him. He pointed out that it was the word 'payable' which was material in the section. Unless the tax became payable, it could not attract s. 43B. In the present case, the sales-tax liability was not payable in this assessment year but wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of itself as it was collected and deposited in the Government treasury as and when payable and it did not form part of the Revenue receipts of the assessee which (sic) the opinion that there is nothing wrong in the order of the CIT(A). In fact, even the very legislature, in its wisdom, realised this difficulty and inserted the amendment by the Direct tax Laws (Amendment) Act, 1987, w.e.f. 1st April, 1989 providing a proviso to s. 43B which runs as under: "Provided that nothing contained in this section shall apply in relation to any sum referred in cl. (a) or cl. (c) or cl. (d) which is actually paid by the assessee on or before the due date applicable in his case for furnishing return of income under sub-s. (1) of s. 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and evidence of such payment is furnished by the assessee along with such return." This very proviso suggests that even if some sum is payable by way of tax, it should be paid in the subsequent quarter and before the due date for furnishing the return of income under sub-s. (1) of s. 139 in respect of the previous year in which the liability to pay such a sum was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Departmental Representative relied on the order of the CIT(A) who has confirmed ad hoc disallowance of Rs. 8,00,000 merely on the analogy that as some provision for pension had been allowed in the assessments of the Caltax Group of Companies, the provision for gratuity too must have been allowed in the case of ESSO Group of Companies. 21. We have heard the parties at length, we are of the opinion that the order passed by the IAC disallowing ad hoc amount of Rs. 8,00,000 and subsequent confirmation of the said order by the CIT(A) cannot be allowed to sustain. The assessee has made positive assertion that in the case of ESSO Group of Companies, there was no gratuity scheme available to its employees and, therefore, the question of allowing any such provision as deduction against the total income, in any year prior to the enactment of s. 40A(7), does not arise In the absence of any evidence to the contrary, disallowance of Rs. 8,00,000 on ad hoc basis merely on the basis of either suspicion or conjecture cannot be allowed to sustain. It is not in dispute that the amount of Rs. 38,73,434 had been actually paid in respect of gratuity during this assessment year and, thus, it was fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re covered under s. 43(3) which provided that the plant included vehicles as well thus s. 37(1) or, for that matter, s. 37(3A) would not be applicable to such expenses. On the other hand, the Departmental Representative relied on the order of the CIT(A). 24. We have heard the parties at length and we are of the opinion that the arguments advanced by the learned counsel have force. The decision of the Bombay High Court applies with full force to the facts of the present case, as in that case, the High Court held that the expenditure on rent in respect of the guest was allowable under s. 30 and the expenses on repairs and polishing of the furniture in the guest house was allowable under s. 31 and consequently, they could not be disallowed under the provisions of s. 37(3). Following the same analogy here, since expenses on repairs to the cars were allowable under s. 43(3), they cannot be disallowed under s. 37(3A). The expenditure on repairs is deductible under s. 31 of the Act and, therefore, no disallowance under s. 37(1)/37(3A) can be made on such expenses. We are, therefore, of the opinion that the order of the CIT(A) on that score is against law and the entire expenditure on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,535 meted out for reimbursement of car expenses to employees and this was nothing but conveyance allowance granted to the employees for use of their vehicles for the purposes of the business of the assessee. We, therefore, decide this issue against the assessee. 28. The next ground relates to the assessee's claim for investment allowance under s. 32A of the Act. The claim is in respect of certain items of plaint and machinery installed in the marketing Division of the assessee. The assessee claimed investment allowance for the same but its claim was rejected by the IAC on the ground that since the Marketing Division was not engaged in the business of manufacture or production of any article, the plant and machinery installed for the business of that division would not qualify for investment allowance. On the same ground, it was confirmed by the CIT(A). 29. The learned counsel for the assessee stressed that the assessee was an industrial undertaking engaged in the integral activity of manufacture of petroleum products and marketing thereof, through the wide network of distributors. There was nothing like a separate marketing organisation which exclusively marketed the petrole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es at length and we are of the opinion that the finding arrived at by the CIT(A) was not proper in the eyes of law. In fact, the very intention of introducing this amendment was to stimulate industrial growth and economic development and with a view to encourage generation of internal resources for financing investment in an industrial undertaking. The very language of s. 32A provides that this investment is not for manufacture or production of goods, but it must be for the business of manufacture and production of goods etc. The Bombay Bench of the Tribunal, in the appeal cited supra, had held that the business of the assessee-company was a single integral and indivisible business of manufacture and production of the mineral oil and that it was only for the sake of facility that it had created divisions like manufacturing and marketing divisions. It is encouraged in law to dissect activity of an industrial undertaking into manufacturing and marketing in a case where such industrial undertaking carries on an integral activity of both manufacture and marketing. Marketing of product is nothing but an industrial consequential activity of the manufacturing process and, thus, it forms p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental Representative relied on the order of the CIT(A). 32. A perusal of the ground of appeal will show that the assessee had challenged the levy of interest on the ground that the relevant legal provisions were not complied with, for instance, the assessing authority was bound to consider the total waiver or remission of the penalty for which he ought to have given the assessee an adequate opportunity of personal hearing. As he was not given that opportunity and nor any specific order regarding the waiver or remission of interest was passed, the levy of interest be set aside. This very ground shows that levy of interest, by itself, was not in question, but only because of the procedure having not been followed, it had been challenged. The Hon'ble Supreme Court, in the case relied upon by the assessee, had held that the question whether the case is made out for waiver or remission of interest cannot be subject matter of an appeal under s. 246C of the Act In case an opportunity has not been given to the assessee, then it is open to the assessee to apply to the ITO, if such an order has been made, to show that remission or waiver of interest was justified. We, therefore, do not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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