Commissioner of Income Tax vs Indian Smelting and Refining Co. Ltd.

This is an application u/s 256(2) of the Income Tax Act, 1961 ("the Act"), filed by the Revenue out of the assessment year 1987-88 seeking a mandamus to the Income Tax Appellate Tribunal for drawing up a statement of case and referring the following questions to this court for opinion :

"1. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that fork-lift trucks are not covered by entry 9A of the old Appendix I and the assessee is entitled to extra shift allowance on fork-lift trucks ?

Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the leave salary paid above the limit prescribed u/s 10(10AA) is exempted and not includible for the purpose of disallowance u/s 40A(5) ?"

On the above question No. 1, the Assessing Officer came to the conclusion that the fork-lift truck falls in the category of items of motor tractors and harvesting combines as mentioned in entry (9A) of para. III-D of old Appendix I and, therefore, extra shift allowance of depreciation as claimed by the assessee was not available. Being aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax. By his order, dated July 19, 1990, the appeal came to be dismissed. By the said order the disallowance of Rs. 63,600 being extra shift allowance of depreciation on fork-lift truck came to be upheld. The assessee carried the matter in appeal before the Tribunal. The Tribunal, by its order dated September 21, 1996, allowed the appeal. The Tribunal came to the conclusion that fork-lift truck cannot be equated to harvesting combines and the fork-lift truck did not fall under para. No. IIID(9A) of Part I of old Appendix I. Being aggrieved by the order of the Tribunal, the Department filed an application before the Tribunal u/s 256(1) of the Act stating therein that the above question be referred to the High Court for opinion. By order dated May 28, 1997, the Tribunal dismissed the said application on the ground that the finding in respect of question No. 1 was based solely on appreciation of facts. In the circumstances, the Department has filed the present petition u/s 256(2) of the Act.

Heard learned counsel for the parties. It was contended on behalf of the assessee that a finding of fact has been recorded by the Tribunal that the fork-lift truck fell in the category of general plant and machinery and that the fork-lift truck was not covered by entry (9A) of para. IIID of old Appendix I related to motor tractors and harvesting combines. It was contended on behalf of the assessee that this was a pure finding of fact and, therefore, no referable question of law arises on the order of the Tribunal. On the other hand, it was urged on behalf of the Department that fork-lift truck fell in the category of items of motor tractors and harvesting combines as mentioned in entry (9A) of Para-III-D of old Appendix I and, accordingly, the question of law arises in the present matter.

We find merit in the contention advanced on behalf of the assessee on question No. 1. Vide decision of the Tribunal dated September 21, 1996, the Tribunal has come to the conclusion that fork-lift truck cannot be equated to harvesting combines and, therefore, the fork-lift truck was not covered by entry (9A) of para. IIID of old Appendix I. In any event, even if the fork-lift truck stood covered by entry (9A) as contended by the Revenue, even then the assessee was entitled to claim depreciation at the rate of 30 per cent. The said rate is mentioned against entry (9A) of para. IIID of old Appendix I. On the other hand, depreciation was allowed only at the rate of 10 per cent. Under the above circumstances, in any view of the matter, question No. 1 has become academic. Hence, question No. 1 cannot be said to be a referable question of law.

However, as regards question No. 2 reproduced hereinabove, the controversy involved is, whether the leave salary paid over and above the limit prescribed u/s 10(10AA) of the Act is exempted and not includible for the purpose of disallowance u/s 40A(5) of the Act. Heard learned counsel for both the sides. This question is a pure question of law.

Accordingly, the Tribunal is directed to draw up the statement of case and refer only question No. 2 stated hereinabove for the opinion of this court.

For the reasons given hereinabove, the application is allowed in part. Rule is made absolute only in respect of question No. 2.

The application is disposed of accordingly with no order as to costs.