Hindustan Electro Graphites Ltd. vs Commissioner of Income Tax

A.K. Mathur, C.J.—This is a reference u/s 256(1) of the income tax Act, 1961, at the instance of the assessee and the following question of law has been referred by the Tribunal for answer by this court:

"Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was right in disallowing the expenditure of Rs.1,27,577 u/s 37(4) of the income tax Act, 1961, which was incurred by the assessee on the residential accommodation maintained by it in its industrial township for the stay of persons connected with its business?"

The brief facts giving rise to this reference are that the assessee-company was maintaining a residential accommodation at Mandideep, an industrial township about 25 kilometers away from Bhopal. It was situated in the compound of the assessee''s staff colony. The said accommodation with boarding facility was maintained for the stay of the company''s officials from Delhi, auditors, foreign technicians, etc. Though the nomenclature given to this accommodation was guest house, the Assessing Officer disallowed the entire expenditure in the sum of Rs. 1,27,577 u/s 37(4) of the Act as being impermissible. The assessee filed an appeal before the Commissioner of income tax (Appeals). The Commissioner of income tax (Appeals) confirmed the finding of the Assessing Officer. Therefore, the matter was taken up before the Tribunal and the Tribunal also confirmed the finding of the Commissioner of income tax (Appeals). Thereafter, the assessee approached the Tribunal for making a reference before this court and, accordingly, the Tribunal has made reference of the aforesaid question of law to this court u/s 256(1) of the Act.

The assessee has not appeared despite notice. We have heard learned counsel for the Revenue and perused the record. The main contention which was raised by the assessee before the Tribunal was that there is a general provision of depreciation which permits all kinds of depreciation including the present depreciation, therefore, that should prevail as against the special provision as has been enacted under sub-section (4) of section 37 of the Act. This contention has been negatived on the principle of generalia specialibus non derogant which means that a particular provision excludes the general provision. Subsection (4) of section 37 of the Act specifically denies any depreciation on maintenance of such kinds of guest houses. This is a special provision and this will override the general provisions of depreciation applicable in the Act. The Tribunal applying this principle has declined to grant any relief to the assessee and, in our opinion, rightly so. Once a particular provision has been made, then that provision will prevail as against the general provision. It is a well known dictum which has been accepted and known as "generalia specialibus non derogant". In view of the above, the Tribunal has rightly approached the matter and denied the depreciation to the assessee in respect of expenditure in the sum of Rs. 1,27,577. We answer the question in favour of the Revenue and against the assessee.