Commissioner of Income Tax vs Haryana Seeds Development Corporation Ltd.

The Income Tax Appellate Tribunal, Chandigarh Bench (hereinafter referred to as the Tribunal) has referred the following questions of law for opinion of this Court u/s 256(1) of the Income Tax Act, 1961 (for short the Act) arising out of its consolidated order dated 11-3-1993 in I.T.A. No. 528/ Chandi/88, in respect of the assessment year 1984-85:

Whether on the facts and in the circumstance of the case, the Tribunal was right in law in holding that the amount of Rs. 2,08,419/- collected by the Assessee from the farmers as inspection and registration fee for and on behalf of the Haryana Seeds Certification Agency, was not a revenue receipt?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing depreciation and investment allowance on plant and machinery on the ground that the National Seeds Corporation had only rendered services under the contract and the ownership over the plant and machinery at Umri remained with the Assessee?

The Assessee showed receipt of Rs. 2,08,419/- by way of inspection and registration fee which was treated by the Assessing Officer to be the income of the Assessee. The claim of the Assessee that the money was collected on behalf of the Haryana Seed Certification Agency and thus, was not income of the Assessee was rejected. On appeal, the Appellate Authority upheld the plea of the Assessee. It was held that the money was collected by the Assessee only as an agent and was not revenue receipt in its hands. This finding was affirmed by the Tribunal.

The Assessing Officer also disallowed the claim of the Assessee for depreciation and investment allowance on plant and machinery on the ground that the Assessee did not have ownership thereof. Claim of the Assessee that the National Seeds Corporation was engaged only for carrying out the work on the plant and only to render certain services was rejected. On appeal, the Appellate Authority reversed the said finding. It was held that the Assessee was owner of the plant and machinery and was entitled to depreciation and investment allowance thereon. This finding has been upheld by the Tribunal.

Findings recorded by the Tribunal to the extent relevant for determining the questions referred are as under:

Ground No. 2 relates to the deletion of addition of Rs. 2,08,419/- on account of inspection and registration fees. The assessing officer had made the said addition on the ground that the money was received by the Assessee and it was a revenue receipt.

The ld. counsel for the Assessee has argued that the collection made by the Assessee by way of inspection and registration fee was not trading receipt but was collection for an on behalf of the Haryana Seeds Certification Agency, which was an independent statutory body of Haryana Govt. It was a collect from farmers and the entire collection was passed on to that Agency for the services rendered by it. It has also been argued that this issue is also covered by the decision of the Tribunal for the earlier three assessment years.

We, therefore, dismiss ground No. 2 as the issue is covered by the earlier decision of the Tribunal.

x x x 23. We find that there is no substance in the plea raised by the Revenue and looking to the details of the contract regarding the plant and machinery at Umri, we find that the National Seeds Corporation had only taken over the work under agreement and after the conclusion of the said agreement, the plant was handed over back to the Assessee-corporation. A certificate to this effect has been placed at page 63 of the paper book. In view of the above, there is no force in ground No. 4 of the Revenue and it is, therefore, rejected.

From the findings extracted above, it is clear that the Assessee received the amount in question on behalf of Haryana Seeds Certificate Agency, which was an independent and statutory body of Haryana Government. The amount received was, thus, not income of the Assessee. The Tribunal has also found that issue was covered by the decision of the Tribunal for the earlier three assessment years. It is also clear that the Tribunal found the plant and machinery to be owned by the Assessee. In such a situation claim of the Assessee for depreciation and investment allowance on the plant and machinery could not be rejected. The Tribunal was, thus, justified in upholding the claim of the Assessee for depreciation and investment allowance on the plant and machinery.

In view of the above, the questions referred are answered against the Revenue and in favour of the Assessee.