Commissioner of Income Tax vs Mahindra Sintered Products Ltd.

U.T. Shah, J.—The following three questions have been referred by the tribunal u/s 256(1) of the Income Tax Act, 1961, at the instance of the Revenue :

"Whether, on facts and in circumstances of the case, the assessee''s claim for deduction of Rs. 70,545 being accrued liability for payment of gratuity (under the Payment of Gratuity Act, 1972, ascertained on actuarial valuation) but for which no provision was made in its account maintained on mercantile basis is allowable notwithstanding the fact that the condition prescribed u/s 40A(7) were not fulfilled ?

(2) Whether on facts and in circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to depreciation at rate of 30 per cent. on jeep vans ?

(3) Whether on facts and in circumstances of the case, the Tribunal was right in law in holding that roads constructed within the factory premises constituted ''plant'' and not ''building'' and were, therefore, eligible for depreciation and development rebate as on ''plant'' ?"

As regards the issue raised in question No. 1, both that parties agreed and stated that the same is covered by the decisions of the Supreme Court in Shree Sajjan Mills Ltd. Vs. Commissioner of Income Tax, M.P., Bhopal and Another, . Learned counsel for the assessee however, stated that the matter may be remitted to the Tribunal to adjust in the light of certain observations made by the Supreme Court in the said decision. Learned Counsel for the Revenue has no objection to the submission made on behalf of the assessee.

We would, therefore, remit this issue to the file of Income Tax Appellate Tribunal with a direction to adjust its order in the light of the aforesaid decision of the Supreme Court after giving due and proper opportunity of being heard to both the parties in this regard.

The issue raised in question No. 2 appears to us to be of academic interest only. The assessee''s claim was that it should have been allowed depreciation at the rate of 30 per cent. on jeep vans. The Revenue, on the other hand, has allowed such depreciation at 20 per cent. The assessment year is 1974-75. In other words, by this time, the assessee would get full depreciation whether it is allowed at 30 per cent. or 20 per cent. After some discussions, both the parties agreed that the issue raised in the aforesaid question is of academic interest only. In this view of the matter, we decline to answer this question.

As regards the issue raised in question No. 3, the same is covered by the decision of this High Court in the case of Commissioner of Income Tax, Bombay City-I Vs. Colour-chem Ltd., and of the Supreme Court in the case of Commissioner of Income Tax, Bombay Vs. Gwalior Rayon Silk Manufacturing Co. Ltd., . Both the courts have been held that the roads constructed within the factory premises are to be considered as "buildings" for the purpose of the depreciation. We, accordingly, answer this question and hold that depreciation on the road constructed within the factory premises should be allowed as on "buildings".

No order as to costs.