Commissioner of Income Tax vs Light Roofings Ltd.

Mishra, J.—Two question are referred to us. One, whether, on the facts and in the circumstances of the case, the Appellate Tribunal is

justified in holding that generators would come under the classification of plant and machinery and hence extra-shift allowance has to be allowed;

and second, whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that certain liabilities should not

be taken into account in the computation of capital employed for allowing relief u/s 80J of the Income Tax Act, 1961.

The first question is answered in Commissioner of Income Tax, Tamil Nadu-IV Vs. M.S. Sahadevan, by a Division Bench of this court, wherein

it is pointed out that wherever the machinery is such that in-built into it is the electric motor, then it would be electrical machinery. The said view is

reiterated by the Allahabad High Court in Commissioner of Income Tax Vs. Saran Khandsari Udyog, and the Kerala High Court in Commissioner

of Income Tax Vs. P. Veriah, . It appears the Central Board of Revenue has already issued Circular No. 1454, on the subject. This should satisfy

all concerned. Thus, the Tribunal has committed no mistake in not treating a generator as electrical machinery.

The-second question, however, has been wrongly decided by the Tribunal, for, it has followed a decision of this court in Madras Industrial

Linings Ltd. Vs. Income Tax Officer and Others, , which has since been overruled by the Supreme Court in Lohia Machines Ltd. and Another Vs.

Union of India (UOI) and Others, . The Supreme Court has clearly laid down that rule 19A(2) and (3) of the Income Tax Rules, 1962, are valid

and within the rule-making authority of the Central Board of Revenue u/s 80J of the Act. Rule 19A(2) of the Rules, in so far as it provided for

computation of the ""capital employed"" as on the first day of the computation period, was within the rule-making authority of the Central Board u/s

80J(1) of the Act, and 19A(3) of the Rules, the Supreme Court has held, and did not suffer from any infirmity in so far as it amended section 80J

by incorporating the provisions of rule 19A as sub-section (1A) in section 80J with retrospective effect from April 1, 1972.

Since the Tribunal has proceeded on the second question on the basis of a wrong assumption of law, it is obvious the matter has got to go back

to the Tribunal for a fresh hearing and determination in accordance with law in the light of the above. The reference is answered accordingly.