9911796707
TMI Blog2004 (1) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... of land is acquired by the assessee, unless the plot is also transferred to the workers that very year, for the simple reason that the deduction is on account of giving the plot to the workers free of cost, and unless that act of giving away the plot takes place, the cause of action for deduction is not complete. The assessee may acquire a plot of land with the intent of sub-dividing it amongst the workers but then there is nothing which prevents the assessee from putting it to any other use or may be just parting with the same. Until the time, the plot is actually given to the workers, it continues to be an asset of the assessee, undisputedly a capital asset, and at its unfettered ownership. Therefore, merely because an assessee acquires the plot with an intent to sub-divide and transfer it to the workers, the expenditure incurred by the assessee on acquiring the plot, per se, does not constitute an admissible deduction and the deduction can only be allowed in the year in which the plot of land is actually sub-divided and transferred to the workers. Thus, we are of the considered view that while assessee s claim for deduction is allowable in principle, it can only be allowed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkers who were ultimately given the land under the union settlement. 3. Briefly, the material facts. The assessee-company is engaged in the business of manufacturing hydraulic rubber hose pipes for industrial appliances. The manufacturing unit of the assessee is located in District Medak in Andhra Pradesh. On 27th November, 1995, the assessee-company entered into a memorandum of settlement with its workers' union, namely Markwel Hose Industries Employees Union, and one of the terms of settlement, set out in paragraph 35 of the same provided as follows: "The management has agreed to provide 120 square yards plot of land for each permanent employee at free of cost at a place selected by the management. It is also agreed that the land Gift Agreement will be conditioned at the discretion of management." It was undisputedly in pursuance of this agreement that the company purchased land, and claimed the expenses of Rs. 4,05,000, incurred in connection with the same, as revenue deduction. In all fairness, however, the company attached a note with the statement of total income which stated as follows: "Staff welfare expenses include Rs. 4,05,000 being expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee's submission, inter alia, was that it just acted as a custodian on behalf of the workers who were real owners of the property. It was also submitted that the assessee company had already filed a plan showing allocation of land to various workers and also the appropriate resolution in this behalf by the directors to prove that the company is only a custodian and not the owner. It was also submitted that in any event, the Assessing Officer ought not to have treated the purchase of land meant for its workers, in consequence of the agreement with the workers' union as a capital asset in its hand but as revenue expenditure incurred for the workmen. The CIT(A) was, however, not at all impressed with these arguments which he dismissed by observing as follows: "... I have considered the above submissions and also perused the assessment order as well as the case cited supra. In this case, ownership of the land purchased is with the company and it is the discretion of the management as and how the land is to be utilized by the workmen. In the case relied upon by the AR and cited supra, the land was purchased in the name of the Government and for construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkers is warranted by the commercial expediency on the ground that it this was being done as per the settlement with workers, and an expenditure being incurred in furtherance with a union settlement cannot but be treated as commercially expedient. The expenditure in question does not constitute a capital expenditure inasmuch as the asset in question does not belong to the assessee, and on formally transferring the plots of land to the workers, the assessee loses all its interests and title in the land in question. The asset, if at all, is created for the purposes of beneficiary workers but then while deciding the deductibility under section 37(1) what is to be seen is the nature of advantage in the hands of the assessee incurring the expenditure rather then the advantage in the hands of the beneficiaries of the expenditure. As the expenditure on giving plots of lands to the workers is admittedly incurred in pursuance to a union settlement, bona fides of which have not been called into question at any stage by the revenue, and giving the plots of land to the workers does not create any assets for the assessee-company, the expenditure in question in principle constitutes admissible d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot is actually sub-divided and transferred to the workers. 10. At the outset, we make it clear that this Tribunal does not have any powers to specifically give any directions for the year which is not in appeal before us. The only issue before us is whether the impugned disallowance was rightly made by the Assessing Officer in this year or not, and, therefore, it is not open to us to give specific direction to Assessing Officer to allow that deduction for the next year. That is not a ground of appeal before us. We may, in this regard, refer to the following observations of Hon'ble Gauhati High Court in the case of Jeypore Timber & Veneer Mills (P.) Ltd. v. CIT [1982] 137 ITR 415: "The provision of section 254 of the Act is an enabling as well as disabling provision. A passing glance creates an impression that the Tribunal has been endowed with plenary power under section 254 of the Act to pass any order as it thinks fit. However, it is not so, as it will appear in the expression "such orders thereon as it thinks fit", in section 254. The word "thereon" in the expression is a serious constriction on the exercise of power by the Tribunal. It can decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenditure acquired on plot for use by workers is to be allowed in the year(s) in which the plots are finally transferred to the workers, the Assessing Officer has the power, and therefore the inherent corresponding duty, under section 153(3) of the Act to recompute the income of that subsequent year to give effect to Tribunal's finding. It is open to the assessee to approach the Assessing Officer for that purpose, or, we may further add at the cost of stating the obvious, to approach the Commissioner, along with the requisite petition for condonation of delay, for revision under section 264 of the Act. 13. For the reasons set out above, we uphold the disallowance in principle so far the year in appeal before us is concerned, and decline to interfere in the matter. The issue raised in the appeal is whether the expenditure in question is deductible in the year before us or not; we hold it is not deductible in the year before us. Whatever be the reasoning and finding in coming to this conclusion, that cannot broaden the scope of our adjudication so as to give an express direction for its allowability in some other year. The assessee shall, however, be at liberty to approach ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
