Commissioner of Income Tax vs Coates of India Limited

Y.R. Meena, J.—On an application u/s 256(1) of the Income-fax Act, 1961, the Tribunal has referred following question, set out at page 2 of the paper book for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in directing the Assessing Officer not to take into account the sum of Rs. 4,45,305 being expenditure on repair of motor cars for computing the disallowance u/s 37(3A)/(3B) of the Income Tax Act, 1961?"

The assessee-company derives income from manufacturing and sale of printing ink and synthetic resins. The return of income along with the audited accounts filed on August 9, 1985, assessment year is 1985-86. During the course of on examination of the return, the Income Tax Officer noticed that the assessee has claimed a sum of Rs. 4,45,305 being expenditure on repairs of motor cars. The Income Tax Officer has disallowed part of the amount under the provisions of Section 37(3A) and (3B) of the Income Tax Act, 1961. In appeal before the Commissioner of Income Tax (Appeals), the Commissioner of Income Tax (Appeals) has confirmed the view taken by the Assessing Officer. In appeal before the Tribunal, the assessee placed reliance on the judgment of the Bombay High Court in the case of Commissioner of Income Tax Vs. Chase Bright Steel Ltd. (No. 1), , and the decision of the Delhi Bench of the Tribunal published in Enkay (I.) Rubber Co. (P.) Ltd. v. IAC [1992] 40 ITD 114. Following the view taken by the Bombay High Court, the Tribunal held that the expenses relating to repair of motor cars are covered by Section 31 and, therefore, did not come within the ambit of Section 37(1) read with Section 37(3A) of the Act.

Learned counsel for the Revenue submits that in the earlier assessment year in the case of this assessee the court has taken the view that the amount of reimbursement of motor car expenses incurred by the employees in using their own motor car in performance of their duties and for the business of the company, the provisions of Section 37(3A)/(3B) of the Income Tax Act, 1961, are applicable as the reibursement for running and maintenance of a car is covered by the Explanation to Sub-section (3A) of Section 37 of the Act.

Learned counsel for the assessee, Dr. Pal, has submitted that "repairs" and "maintenance" are two different expressions. The expenses on repairs of motor car is allowable u/s 31 of the Income Tax Act, therefore, there is no need to go for the deduction u/s 37(1) of the Income Tax Act and when the expenditure is not allowed u/s 37(1), the provisions of Section 37(3A)/(3B) are not attracted for any disallowance. He placed reliance on the decisions of this court in the cases of Commissioner of Income Tax Vs. Orient Paper and Industries Ltd., ; Commissioner of Income Tax Vs. Tungabhadra Industries Ltd., ; Commissioner of Income Tax Vs. Price Waterhouse, and National Engineering Industries Ltd. Vs. Commissioner of Income Tax, .

In Commissioner of Income Tax Vs. Orient Paper and Industries Ltd., , this court has observed that repair on motor car would come u/s 31 and, therefore, Section 37(3A)/(3B) will not apply. A similar view has been taken by this court in the later decision, that is, National Engineering Industries Ltd. Vs. Commissioner of Income Tax, , wherein this court has held that to expenditure on repair and insurance of motor cars, provident fund and bonus paid to drivers, the ceiling and restriction ''under Section 37(3A) is not applicable.

The decision relied upon by the Revenue relates to "running and maintenance" of the motor car and not repair of car when the expenditure on repair is directly covered by the decision of this court in the case of Commissioner of Income Tax Vs. Orient Paper and Industries Ltd., , we find no reason to interfere in the order of the Tribunal.

In the result, we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue.

The reference so made is accordingly disposed of.