Titanium Equipment and Anode Manufacturing Co. Ltd. vs Deputy Commissioner of Income Tax

Markandey Katju, C.J.—These two appeals u/s 260A of the Income Tax Act, 1961, are being disposed of by a common judgment.

In both these appeals one common question of law involved is whether the Tribunal was right in upholding the order of the Commissioner of Income Tax (Appeals) disallowing extra shift allowance and additional depreciation on the assets leased out by the assessee ?

The assessee is a public limited company registered under the Indian Companies Act, and the relevant assessment year is 1986-87. The assessee claimed extra shift depreciation allowance on the leased out assets. The authorities below rejected this claim on the ground that since the assessee had leased out the assets it could not be said that it used the assets itself.

In Parkside Explosives and Industries Ltd. (Now Known As Matheson Bosanquet Enterprises Ltd.) Vs. Commissioner of Income Tax, (Tax Case Reference No. 91 of 2000) a Division Bench of this High Court following the decision of the High Court of Karnataka in Commissioner of Income Tax Vs. Maharashtra Apex Corporation Ltd., (which decision was upheld by the Supreme Court in CIT v. Maharashtra Apex Corporation Ltd., (2002) 254 ITR 98 (SC) , held that the lessor is entitled to the extra shift and additional depreciation allowance on the assets leased out. Hence, the view of the Tribunal and other Income Tax authorities, in our opinion; is not correct.

However, it is urged by learned Counsel for the Department that there is no finding of the Income Tax Appellate Tribunal or the lower Income Tax authorities that the lessee in fact had worked multiple shifts.

We have carefully perused the order of the Tribunal, Commissioner of Income Tax (Appeals) and the Assessing Officer, and find that this submission is correct. There is no mention in any of these orders that the lessee had in fact worked multiple shifts.

In the circumstances, while we set aside the impugned orders of the Tribunal and the Commissioner of Income Tax (Appeals) we remand the matter to the Commissioner of Income Tax (Appeals) for recording a finding on this point after giving the assessee as well as the Department an opportunity to produce their evidence as to whether the lessee had in fact worked multiple shifts. If it is found that the lessee had in fact worked multiple shifts the assessee will be entitled to the aforesaid allowance.

In T. C. No. 33 of 2002 the appellant has also raised the issue of applicability of section 32A(7) of the Income Tax Act. The Tribunal has rejected the assessee''s appeal following the decision reported in Commissioner of Income Tax Vs. Madras Wire Products, , which deals with sections 75 to 77 of the Income Tax Act. However, there is no mention of section 32A(7) therein. Since, that provision has not been looked into by the Tribunal or the lower authorities, the Commissioner of Income Tax (Appeals) will consider the assessee''s claim in respect of section 32A(7) also.

The appeals are allowed, the impugned judgments of the Tribunal and the Commissioner of Income Tax (Appeals) are set aside, and the matter is remanded to the Commissioner of Income Tax (Appeals) to pass a fresh order in accordance with law and in the light of the observations made above.