Commissioner of Income Tax vs Automobile Products of India Ltd.

T.D. Sugla, J.—This is a reference at the instance of the Department. The proceedings relate to the assessee''s assessment for the years 1968-69, 1969-70 and 1970-71. The Tribunal has referred to this court the following three questions of law u/s 256(1) of the Income Tax Act, 1961 :

Assessment year 1968-69 :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the cash allowance, viz., entertainment allowance, car allowance and house rent allowance do not come within the purview of section 40(c)(iii) of the Income Tax, 1961 ?

Whether, on the facts and in the circumstances of the cases, the assessee was entitled to depreciation on the roads inside the factory premises treating them as plant or building used for the purpose of business ?"

Assessment year 1969-70 :

"3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in directing the Income Tax Officer to verify the admissibility of development rebate to Hindu Auto Industries Ltd., (HAIL), the amalgamating company, for the assessment years 1966-67 to 1968-69 ?"

Counsel are agreed that, in view of our court''s judgment in Commissioner of Income Tax, Bombay City-II Vs. Indokem Private Ltd., , the first question requires to be answered in the affirmative and in favour of the assessee. The question is so answered.

Counsel are also agreed that the issue involved in the second question is covered by our court''s judgment in the case of Commissioner of Income Tax, Bombay City-I Vs. Colour-chem Ltd., . In view thereof, we answer the second question thus :

"The assessee was entitled to depreciation on the roads inside the factory premises treating them as building used for the purpose of the business and not as "plant".

As regards the third question, it is seen that the Tribunal has not directed the Income Tax Officer to allow the assessee''s claim for development rebate. The Tribunal has only directed the Income Tax Officer to verify the admissibility of the development rebate to Hindu Auto Industries Limited (HAIL), the amalgamating company, for the assessment years 1966-67 to 1968-69. Apart from the fact that one finds it difficult to see anything wrong with such a direction, we find that the direction was based on the Board''s Circular dated October 14, 1965, and our court''s judgment in the case of TATA IRON and STEEL CO. LTD. Vs. N. C. UPADHYAYA AND ANOTHER. TATA IRON and STEEL CO. LTD. v. KUM. D. V. BAPAT and ANOTHER., . No doubt, thereafter, the view taken both in the circular and by our court was disapproved by the Supreme Court in its decision in the case of Shri Shubhlaxmi Mills Limited Vs. Additional Commissioner of Income Tax, Gujarat, . However, by retrospective amendment of section 34(3)(a) by the Finance Act, 1990, the legal position has been restored in keeping with the view taken in the aforesaid circular and our court''s judgment in TATA IRON and STEEL CO. LTD. Vs. N. C. UPADHYAYA AND ANOTHER. TATA IRON and STEEL CO. LTD. v. KUM. D. V. BAPAT and ANOTHER., . Accordingly, we do not find anything wrong with the Tribunal''s order in this regard. Therefore, the third question is also answered in the affirmative and in favour of the assessee.

No order as to costs.