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1992 DIGILAW 162 (KER)

C. I T v. Kontiki Chemicals & P Pvt Ltd

1992-06-04

HABEEB MOHAMMED, K.S.PARIPOORNAN

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JUDGMENT K.S. Paripoornan, J. 1. The Revenue is the petitioner in this batch of three cases. The O.Ps. are filed under S.256(2) of the Income Tax Act. The same assessee a private limited company is the respondent in all these cases. The assessee received investment subsidy from the Central Government for setting up industries in backward areas. While completing the assessment for the years 1980-81,1981-82and 1982-83 the Income Tax Officer deducted the investment subsidy received by the assessee from the cost of assets for the purpose of computing depreciation investment and claim under S.80-J of the Income Tax Act. In the" appeals, the Commissioner of Income Tax (Appeals) held that the above subsidy received, should not be reckoned or taken into account for determining the actual cost under S.43(1) of the Income Tax Act for the purpose of depreciation, investment allowance, etc. The Revenue filed appeals before the Income Tax Appellate Tribunal (in short, the Tribunal). The Tribunal followed its earlier decision in Western India Plywood Ltd. case (ITA No. 148(Coch)/1980, order dated 23-9-1981, as also a circular of the Central Board of Direct Taxes in its common order dated 7-9-1987 and held that the subsidy was given only for starting industries in backward areas and it did not refer to acquisition of any machineries and so should not be taken into account for determining the actual cost under S.43(1) of the Income Tax Act for the purpose of depreciation, investment allowance, etc. The Revenue filed applications under S.256(1) of the Income Tax Act, dated 18-11-1987 to refer certain questions of law, which arose out of the Tribunal's common order, dated 7th September, 1987, for the decision of this Court. The Tribunal by order dated 15th September, 1989 declined to refer the questions of law formulated by the Revenue for the decision of this Court. The Tribunal referred to the decision of this Court in ITR No. 310 of 1982-judgment dated 16-3-1989 - reported in Commissioner of Income Tax v. Relish Foods (180 ITR 454) to hold that the common order passed by it in the appeals, dated 7-9-1987, is in accord with the decisions of the Division Bench of this Court referred to above. It is thereafter the Revenue has filed this batch of three O.Ps. It is thereafter the Revenue has filed this batch of three O.Ps. under S.256(2) of the Income Tax Act and has formulated two questions in Para.7 of the O.Ps., which may be directed to be referred to this Court. The questions are as follows:- "1. Whether, on the facts and in the circumstances of the case, the investment subsidy is to be deducted for the purpose of depreciation, investment allowance, 80J etc.? 2. Whether, on the facts and in the circumstances of the case, i) the circular has any relevance to the issue except for the limited purpose of not treating the receipt as income; ii) the Tribunal is justified in relying on the circular which is extraneous to the issue?" 2. Counsel for the assessee raised a preliminary objection and contended that no referable question of law arises in this batch of O.Ps: It is true that at this stage, in considering an application under S.256(2) of the Income Tax Act, this Court is concerned with the only aspect as to whether there is a referable question of law in the common order passed by the Tribunal. That the said question may be ultimately decided in favour of the assessee or the Revenue, is of no consequence. See Commissioner of Income Tax v. Managing Trustee, Jalakhabai Trust (66 ITR 619-SC) at p. 622. But counsel for the assessee would contend that the decision rendered by the Tribunal in the appeals is in accord with the Bench decision of this Court in Commissioner of Income Tax v. Relish Foods (180 ITR 454) and so it cannot be said that there is any referable question of law in these cases. We were invited to a Bench decision of this Court in Commissioner of Income Tax v. K.S.R.T.C. Pension and Gratuity Fund Trust ( 1987(2) KLT 106 ). In the said decision, relying on the decision of the Madras High Court in Commissioner of Income Tax v. Carborandum Universal Ltd. (156 ITR 1), this Court took the view, that in so far as the decision of the Tribunal is in accord with the view taken by this Court, even though a question of law may arise, it cannot be stated to be a referable question of law. This was so stated, since the decision of the Tribunal is in accord with the decision of this Court and it is not possible to say that there is any error in the decision and the mere fact that a question of law is put forward will not in all cases behove the High Court to direct the Tribunal to refer the said question for the decision of this Court. A referable question of law should arise in the sense that the question of law can be substantiated by reasonable arguments. This Bench decision rendered in O.P. No. 611 of 1985 and reported in K.S.R.T.C. Pension and Gratuity Fund Trust case ( 1987 (2) KLT 106 ), following the decision of the Madras High court in Carborandum Universal Ltd. case (156 ITR 1,) was taken up in Special Leave Petition before the Supreme Court - SLP 4410 of 1988. A three member Bench of the Supreme Court granted Special Leave and set aside the order of this Court and directed the question of law to be recorded for the decision of this Court. So it cannot be said that the decision of this court reported in K.S.R.T.C. Pension and Gratuity Fund Trust case ( 1987 (2) KLT 106 ) represents the correct position in law. There was an earlier decision of Punjab and Haryana in Telu Ram Raunqui Ram v. Commissioner of Income Tax (146 ITR 401), similar in import to Carborandum Universal Ltd. case (156 ITR 1). There has been enlightened academic criticism that the said decision does not lay down the law correctly, See (1984) 40 CTR Journal 220 (Article by P.K. Ravindranatha Menon). That apart, the decision of the Supreme Court in D.S. Madan v. Commissioner of Income Tax (1991 (192) ITR 344-SC) would go in show it cannot always be said that in all cases, though a similar question of law has been answered in an earlier case in a particular way, an identical question of law, arising in a later case, would cease, to be a referable one. *EditorsNote: The view expressed by the Supreme Court in D.B. Madan 1991 (192) ITR 344 is similar to the view expressed by Mr. Menon in 1984 in 40 Current Tax Reporter (Journal) 220."The burden of today continues to be a burden of tomorrow and comes back as the burden yesterday". 3. *EditorsNote: The view expressed by the Supreme Court in D.B. Madan 1991 (192) ITR 344 is similar to the view expressed by Mr. Menon in 1984 in 40 Current Tax Reporter (Journal) 220."The burden of today continues to be a burden of tomorrow and comes back as the burden yesterday". 3. In the light of the above two decisions of the Supreme Court, it cannot be said that no referable question of law arises out of the common order passed by the Tribunal. It may be that the question of law formulated is one governed by a Bench decision of this Court. Even so, unless it is demonstrated that the decision on the question of law formulated is merely academic, or governed by any decision rendered by the Privy Council, or the Federal Court or the Supreme Court of India, it continues to be a referable question of law. In this view of the matter, we allow this batch of three O.Ps. and direct the Tribunal to refer the questions of law formulated in Para.7 of the O.Ps., extracted hereinabove, to this Court. The O.Ps. are allowed. Allowed.