ORDER
JORDAN KACHCHAP, J. M. :
This appeal by the assessee is directed against the order dt. 9th Dec., 1988 of the CIT(A), Central-I, Calcutta and the relevant assessment year is 1984-85. To contest the appeal the assessee has set forth as many as 10 grounds. Grounds No. 1 and 10 are general. Ground No. 9 was not pressed at the time of hearing. Hence, this ground stands disposed of accordingly.
2. Grounds No. 2 and 3 relate to Allahabad Property and deriving income therefrom. Of course, the matter of depreciation is also in dispute with regard to the aforesaid property.
3. The Assessing Officer added a sum of Rs. 35,250 being rental income from the said house property at Allahabad under the head Income from House Property against the rental income shown at Rs. 3,000 by the assessee. The Assessing Officer made the aforesaid addition of Rs. 35,250 considering the estimated interest @ 15% on interest free advance of Rs. 2,35,000 taken by the assessee from the tenant. When the matter came on appeal before the CIT(A) he too confirmed the action of the Assessing Officer.
4. Before us, Shri D. K. Kothari, the learned counsel for the assessee submitted that in fact the house property in question was previously used for business by the assessee-company itself and now that was given on rent to Ashok Woollen Mills Pvt. Ltd. for business purposes. It was stated that the main business of the assessee was growing and manufacture of tea. The house property at Allahabad was given on rent for business purposes which was subservient and incidental to the main business of the assessee. The assessee-company was getting Rs. 3,000 only as rent because the assessee-company took interest free loan to the tune of Rs. 2,35,000. He stated that the orders of the authorities below, therefore, considering the rental income as income from house property and not treating same as business income were unjustified. He also added that the addition of Rs. 35,250 on an estimated interest rate of 15% on the aforesaid interest-free loan was also not justified and against the norms of the business spheres. He also emphasised that since the house property was a business asset and, as such normal depreciation was to be allowed. The learned counsel added that the identical matters in the case of the assessee-company itself had come earlier also for the asst. yrs. 1978-79 to 1980-81 and the Tribunal, B-Bench, Calcutta by its order dt. 24th July, 1991 in ITA Nos. 2824/C/88, 69/C/89 and 182/C/89 allowed the aforesaid claims of the assessee-company.
4. On the other hand, Dr. K. Chaudhuri, the learned Departmental Representative of the Revenue entirely relied on the orders of the authorities below. However, he submitted that though the matters in issue were decided by the Tribunal against the Revenue, but that decision not being acceptable, the Department was contesting the same in order to keep alive those issues as the Department might contest them before the Honble Calcutta High Court.
5. We have heard the rival submissions on both sides and have gone through the appeal record and the materials available therein. Since the rental income from the Allahabad property is subservient and incidental to the main business of growing and manufacture of tea and further that the matter has already been considered and decided by the Tribunal and, as such, consistent with the earlier order of the Tribunal and for the reasons as assigned therein we decide all the connected issues in favour of the assessee. Since the letting out of the property in question is subservient and incidental to the main business of the assessee-company and, as such, the income is to be assessed under the head Business and consequently, normal depreciation is also allowable. The annual rental value of the property is to be taken at Rs. 3,000 as the assessee has disclosed for the obvious reason that the matter was already decided by the Tribunal as stated above. So, both Grounds No. 2 and 3 stand decided in favour of the assessee.
6. Ground No. 4 relates to disallowance of Rs. 1,133 which consists of shall contributions paid by the assessee-company to various committees and other charitable, social and philanthropic organisations. The authorities below of the Revenue have disallowed the aforesaid amount being a non-business expenditure.
7. Shri D. K. Kothari, the learned counsel for the assessee submitted that on identical matters the Tribunal by its order dt. 17th May, 1990 in ITA No. 3049/C/88 in the case of Suman Tea & Plywood Industries Pvt. Ltd. for the asst. yr. 1983-84 and order dt. 24th July, 1991 in the assessees own case in ITA Nos. 2824/C/88, 69/C/89 and 182/C/89 for the asst. yrs. 1978-79 to 1980-81 considered the expenditure as business expenditure. The learned counsel urged that the point in controversy was covered by the aforesaid orders of the Tribunal.
8. The learned Departmental Representative of the Revenue, of course, stated that in order to keep the issue alive the Department was contesting the matter.
9. Since the matter is a covered point and in the appeal record no distinguishing features have been brought with the facts of the earlier cases, and, as such, consistent with the earlier orders of the Tribunal we decide this issue in favour of the assessee.
10. Ground No. 5 relates to allowance of only Rs. 90,871 out of total expenditure of Rs. 13,51,133 under S. 40A(9) of the IT Act on account of expenses incurred by the assessee-company towards labour and staff welfare by making contributions to two hospitals established and run for labour and staff.
11. Shri D. K. Kothari, the learned counsel for the assessee submitted that the assessee-company was to establish two separate hospitals, namely, Suntok Hospital and Cherideo Purbut Hospital in view of S. 10 of the Assam Plantation Labour Act, 1951 and the Rules prescribed thereunder. He stated that those two hospitals were being run by trusts wherein the trustees were from the employees and from the management. Of course, in the trust boards the number of employees was larger than the representatives of the management. The learned counsel emphasised that previously the hospitals were run by the assessee-company itself but now the management of the hospitals was given to the trusts in which the employees of the assessee-company were having control. Those two hospitals exclusively served the medical needs of the employees of the assessee-company engaged at Suntok Tea Estate and Cherideo Purbut Tea Estate respectively. The learned counsel stated that the authorities below of the Revenue did not consider the entire provision of S. 40A(9) of the Act. The later part of the provision speaks about the exceptions in which the rigour of the applicability of the aforesaid section was mitigated. He stated that the contributions which the assessee-company made towards the aforesaid two trusts were allowable under Ss. 28 and 37 of the Act. The learned counsel having drawn our attention to the order dt. 14th Jan., 1988 of the Madras Bench of the Tribunal in the case of India Pistons Repco Ltd. vs. IAC (1988) 30 TTJ (Mad) 502, submitted that in a similar situation the contribution made by the assessee to the Death Relief Fund set up under the provisions of the Industrial Disputes Act was allowed as expenditure under S. 37 of the Act and the provision of S. 40A(9) was not attracted. The learned counsel submitted that the aforesaid order of the Tribunal squarely covered the case of the assessee-company also. Of course, he added the two trusts viz. Cherideo Purbut Hospital and Suntok Hospital were established on 16th Sept., 1983 and 23rd Sept., 1983 respectively long before the introduction of S. 40A(9) by the Finance Act, 1984 though with retrospective effect from 1st April, 1980.
12. On the other hand, Dr, K. Chaudhuri, the learned Departmental Representative of the Revenue entirely relied on the orders of the authorities below, and in particular the order of the learned CIT(A). He submitted that under the clear cut provision of S. 40A(9) the contributions paid to any trust for any purpose were not allowable as deduction. According to him, the order of the learned CIT(A) was justified.
13. We have considered the rival submissions on both sides and have gone through the appeal record. The Revenue authorities have allowed only Rs. 90,871 out of a total sum of Rs. 13,51,133 incurred by the company by making contributions to the two hospitals having taken recourse to the provision of S. 40A(9) of the Act. In order to have ease in discussion we may reproduce the provision of the aforesaid section hereunder :
'40A(9) No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution, to, any fund, trust, company, AOP, BOI, society registered under the Societies Registration Act, 1860 (21 of 1960), or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent provided by or under sub-cl. (iv) of cl. (v) of sub-s. (1) of S. 36, or as required by or under any other law for the time being in force.'
From the aforesaid provision it is manifest that this provision has two parts. The first part clearly prohibits deduction in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to any fund, trust, company, AOP, BOI, registered society and other institutions for any purpose.
The second part of the said provision speaks about the exceptions also. The second part speaks that if the sum in question was paid for the purposes as required by or under any other law for the time being in force, in that event the claim qualifies for deduction. To our mind, the submissions as have been made by the learned counsel for the assessee and the case law as referred to [India Pistons Repco Ltd. vs. IAC (supra)] succour the assessee-company from the saddle of the first part of the aforesaid provision of S. 40A(9) of the Act. Sec. 10 of the Plantations Labour Act, 1951 and r. 35 prescribed thereunder require the assessee-company, primarily it being a tea growing and manufacturing company, to provide and maintain hospitals so that medical facilities are immediately available to the workers and their family members. Sub-s. (2) of S. 10 of the Plantations Labour Act, 1951 appears to be more rigorous that if medical facilities are not provided and maintained the Chief Inspector may cause to be provided and maintained therein such medical facilities and recover the cost thereof from the defaulting employer. So, as per the provisions of the Plantations Labour Act and the Rules made thereunder hospitals in tea estates or tea gardens were established, and in the case of the assessee-company the two hospitals viz. Cherideo Purbut Hospital and Suntok Hospital were established on 16th Sept., 1983 and 23rd Sept., 1983 respectively and the management of the hospitals was entrusted to the respective trusts in which the employees were having an important role to play. The assessee-company made total contributions of Rs. 13,51,133 out of which the Revenue authorities have disallowed Rs. 12,52,000 in view of the provision of S. 40A(9) of the Act. To our mind, in view of the second part of the aforesaid provision the actions of the authorities below are not justified. We may helpfully mention the order of the Madras Bench of the Tribunal also as has been referred to by the learned counsel for the assessee in the case of India Pistons Repco Ltd. vs. IAC (supra). In that case also, in view of the provisions of the Industrial Disputes Act a Death Relief Fund was created and the assessee-company made contributions to that fund. The Revenue authorities in view of the provision of S. 40A(9) of the Act disallowed the said contributions but the Tribunal, considering the later part of the aforesaid S. 40A(9) held that the contributions made to Death Relief Fund could not be disallowed. To our mind also, this order of the Madras Bench of the Tribunal squarely covers the matter in issue. So, regard being had to the entire facts and circumstances of the case and in view of the discussions as made above we do not think that the learned. CIT(A) was justified to disallow the aforesaid amount of Rs. 12,52,000 which the assessee-company contributed to the two hospitals viz. Cherideo Purbut Hospital and Suntok Hospital which, of course, were run by the respective employees welfare trusts in which the employees were having a greater role to play. The order of the learned CIT(A) is unjustified and so we reverse his order on this point.
14. Ground No. 6 relates to disallowance of extra shift allowance on buildings and Ground No 7 speaks about the disallowance of investment allowance on jeeps and motor cycles for that being not road transport vehicles.
15. Shri D. K. Kothari, the learned counsel for the assessee having referred to paragraphs 5 and 12 of the Tribunals order dt. 24th July, 1991 passed in the assessees own case in ITA Nos. 2824/C/88, 69/C/89 and 182/C/89 for the asst. yrs. 1978-79 to 1980-81 submitted that by the aforesaid respective paragraphs of the order of the Tribunal the matters in issue were already considered and decided in favour of the assessee-company.
16. Dr. K. Chaudhuri, the learned Departmental Representative of the Revenue, of course, made submissions to the effect that the Department was contesting to keep the issues alive.
17. Since the matters in issue are covered by the earlier order of the Tribunal in the case of the assessee-company itself and as no distinguishing features have been brought in the appeal record with the facts and circumstances of the earlier cases and, as such, consistent with the Tribunals earlier order and for the reasons as assigned therein we dispose of both the grounds in favour of the assessee. On these points also we reverse the order of the learned CIT(A).
18. Ground No. 8 relates to addition of Rs. 69,764 being liabilities written back unilaterally. The authorities below having taken recourse to the provision of S. 41(1) of the Act added back the amount in question. Of course, the learned CIT(A) has further recorded that the details of these expanses and other evidences relating to these liabilities were not furnished.
19. Shri D. K. Kothari, the learned counsel for the assessee having referred to pages 83 and 84 of the paper book submitted that the assessee-company furnished the necessary details before the CIT(A). Rs. 34,472 pertains to Cherideo Purbut Tea Estate and Rs. 35,292 pertains to Suntok Tea Estate. The learned counsel also stated that even if the liabilities, though already allowed to be deducted in the earlier years, on accrual basis but later on written back unilaterally, would not constitute income under S. 41(1) of the Act, because there was no cessation or extinction of the liabilities and in support of the said submission he relied on the decision of the Honble Calcutta High Court in the case of CIT vs . Sugali Sugar Works (P) Ltd. : [1983]140ITR286(Cal) . The learned counsel added that he had referred to the above decision before the learned CIT(A) but he did not consider the same in right perspective and confirmed the addition merely on the ground that there was no evidence as to the details of those liabilities. According to the learned counsel for the assessee, the addition was unjustified and bad in law.
20. Dr. K. Chaudhuri, the learned Departmental Representative of the Revenue relied on the order of the learned CIT(A).
21. In view of the decision of the Calcutta High Court in the case of CIT vs. Sugali Sugar Works (P) Ltd. (supra) we do not think that the addition is justified. Though the liabilities were unilaterally written back, but that does not mean that the liabilities ceased or extinguished, particularly when the assessee-company claimed that the parties are still claiming payments and others may claim the same. On this issue also, we do not find the order of the learned CIT(A) to be justified and, as such, we reverse his order.
22. In the result, the appeal by the assessee succeeds and is allowed.