Atlas Cycle Industries Ltd. Vs. Commissioner of Income-tax - Court Judgment

Excerpt:
- sections 80 (2) & 89 & punjab motor vehicles rules, 1989, rules 85 & 80: [t.s. thakur, cj, jasbir singh & surya kant, jj] appeal against orders of state or regional transport authority imitation held, a stipulation regarding the period of limitation available for invoking the remedy shall have to be strictly construed. that is because any provision by way of limitation is in the nature of a restraint on the remedy provided under the act. so viewed two inferences are clear viz., (1) sections 80 and 89 of the act read with rule 85 of the rules make it obligatory for the authorities making the order to communicate it to the applicant concerned and (2) the period of limitation for any appeal against the order is reckonable from the date of such communication of the reasons would imply communication of a copy of the written order itself, a party who knows about the making of an order cannot ignore the same and allow grass to grow under its feet and do nothing except waiting for a formal communication of the order or to choose a tenuous plea that even though he knew about the order, he was waiting for its formal communication to seek redress against the same in appeal. if a party does not know about the making of the order either actually or constructively it may claim that the period of limitation would start running from the date it acquires knowledge of the making of an order but one cannot understand how a party, who has acquired knowledge of the making an order either directly or constructively can ignore the same and belatedly seek redress just because the authority making the order had made a default in formally communicating the order to him. allowing a party to do so would amount to placing a premium on the lack of diligence of a party, who is remiss in seeking a remedy that was available to it. therefore, knowledge whether actual or construction of the order passed by the state or regional transport authority should result in commencement of the period of limitation. thus,. in cases where the state or regional transport authority has not communicated the order of refusal passed to the persons concerned, the period of limitation for filing an appeal would commence from the date when the parties concerned acquire knowledge of passing of the said order. - the assessee preferred further appeals before the tribunal for the two years, which were also partly allowed vide order dated june 21, 1983. 4. both the revenue as well as the assessee filed separate applications under section 256(1) of the act in both the assessment years, requiring the income-tax tribunal, delhi bench 'c',new delhi (for short 'the tribunal'), to refer questions of law arising out of its order for the opinion of this court. clause (2) of the agreement clearly specifies that the hirer shall hold the said property as a tenant during the hire purchase period. we are, therefore, satisfied that the tribunal has, on the basis of the conditions mentioned in the hire purchase agreement, rightly concluded that the assessee was not the owner of the tenement acquired from the housing board and, as such, was not entitled to depreciation. 28. in view of the above, we are satisfied that the view taken by the tribunal is correct and does not call for any interference.n.k. sud, j.1. this order will dispose of i. t. rs. nos. 100 to 103 of 1984, under section 256(1) of the income-tax act, 1961 (for short 'the act'), relating to the assessment years 1976-77 and 1977-78.2. the assessee is a limited company engaged in the manufacture and sale of bicycles and accessories. it filed its return of income for the assessment year 1976-77 on june 30, 1976, declaring an income of rs. 64,01,770. the return for the assessment year 1977-78 was filed on july 30, 1977, declaring an income of rs. 1,28,77,730. the assessment for the assessment year 1976-77 was completed vide order dated july 10, 1980, determining the total income at rs. 1,05,41,160. similarly, assessment for the assessment year 1977-78 was completed vide order dated august 18, 1980, at an income of rs. 1,54,52,630. the difference in the assessed income and the returned income was on account of certain additions/disallowances made by the assessing officer.3. the assessee preferred appeals before the commissioner of income-tax (appeals) (for short 'the cit(a)'), which were partly allowed vide orders dated october 17, 1980, and november 12, 1980, for the assessment years 1976-77 and 1977-78, respectively. the assessee preferred further appeals before the tribunal for the two years, which were also partly allowed vide order dated june 21, 1983.4. both the revenue as well as the assessee filed separate applications under section 256(1) of the act in both the assessment years, requiring the income-tax tribunal, delhi bench 'c', new delhi (for short 'the tribunal'), to refer questions of law arising out of its order for the opinion of this court. the assessee's applications for the assessment years 1976-77 and 1977-78 were registered as ra nos. 1230 and 1231/delhi of 1983, whereas the revenue's applications for these two years were registered as r. a. nos. 1334 and 1335/ delhi of 1983. the tribunal partly allowed all the four applications and has referred some of the questions for the opinion of this court.5. in the reference applications filed by the revenue, the following question has been referred for both the years :'whether, on the facts and in the circumstances of the case, the appellate tribunal was right in holding that the value of the perquisites in respect of the free use of cars by shri b.d. kapur, and j.d. kapur should be determined under rule 3 of the income-tax rules, 1962 ?'6. while examining the claim for deduction of expenditure on remuneration, etc., to two directors, namely, sarvshri b.d. kapur and j.d. kapur, the assessing officer had estimated the expenditure on provision of cars to them at rs. 30,000 and rs. 20,000, respectively. the assessee's claim that for the purpose of section 40(c)(i) of the act, the perquisite value as determined under rule 3 of the income-tax rules, 1962, and not the actual expenditure should have been taken into account, has been accepted by the tribunal. this issue stands settled by the apex court in cit v. british bank of middle east : [2001]251itr217(sc) , wherein while dealing with the provisions of section 40a(5) of the act, which are in pari materia with the provisions of section 40(c) of the act, it has been held that it is the actual expenditure and not the perquisite value which has to be taken into consideration. thus, the finding of the tribunal is contrary to the law laid down by the apex court in the case of british bank of middle east : [2001]251itr217(sc) . counsel for the assessee has not been able to controvert this position. accordingly, the question in both the years is answered in the negative, i.e., in favour of the revenue and against the assessee. 7. we now come to the questions of law referred to us at the instance of the assessee. the same are as under :'1. whether, on the facts and in the circumstances of the case, the appellate tribunal was right in holding that the assessee had not become the owner of the tenements agreed to be acquired from the housing board, haryana, and was thus not entitled to depreciation in respect of these tenements ?2. whether, on the facts and in the circumstances of the case, the tribunal was right in law in disallowing, the sum of rs. 53,998 and rs. 57,489 incurred by the assessee on account of fluctuation of exchange rate on foreign currency by holding that the said expenditure was capital in nature ?3. whether, on the facts and in -the circumstances of the case and having regard to the provisions of section 80-o of the income-tax act, the appellate tribunal was justified in law in holding that the sum of rs. 60,000 and 77,000 was not exempt ?4. whether, on the facts and in the circumstances of the case and having regard to the provisions of section 35b, the appellate tribunal was right in disallowing, export markets development allowance on freight and transportation expenses, respectively, amounting to rs. 12,84,970 and rs. 19,43,649 in the assessment years 1976-77 and 1977-78 and in packing expenses of rs. 4,49,487 in the assessment year 1977-78 and in restricting the deduction in respect of the salaries of the persons employed in the export and design departments in the two assessment years ?5. whether, on the facts and in the circumstances of the case, the tribunal was right in disallowing the sum of rs. 97,850 paid on account of surtax ?6. whether, on the facts and in the circumstances of the case and having regard to the provisions of section 80vv, the tribunal was right in disallowing rs. 6,906 and rs. 2,709 being the legal fees paid in connection with the determination of its tax liability ?'8. the assessee had claimed depreciation in respect of certain houses acquired from the housing board, haryana, under a hire purchase agreement. this claim was disallowed on the ground that the assessee had not become the owner of the said property and, therefore, was not entitled to depreciation. the tribunal after taking into account the hire purchase agreement found that the assessee was only to be considered as a tenant or hirer of the property till the last instalment in respect of price agreed upon had been paid.9. we have perused the agreement which has been placed as annexure 'e' with the statement of the case. clause (2) of the agreement clearly specifies that the hirer shall hold the said property as a tenant during the hire purchase period. it further provides that the hirer shall not sell, transfer, assign or otherwise part with the possession of the whole or any portion of the said property without the previous consent in writing of the owner which can be refused in the absolute discretion of the owner. clause (3) also shows that the owner has agreed to transfer the property to the assessee only after the expiryof the hire purchase period. we are, therefore, satisfied that the tribunal has, on the basis of the conditions mentioned in the hire purchase agreement, rightly concluded that the assessee was not the owner of the tenement acquired from the housing board and, as such, was not entitled to depreciation.10. accordingly, we answer question no. 1 in the affirmative, i.e., in favour of the revenue and against the assessee.11. question no. 2 relates to disallowance of rs. 53,998 and rs. 57,489 for the assessment years 1976-77 and 1977-78, respectively, which represented loss arising on repayment of loan raised in foreign currency due to fluctuation of exchange rate. the tribunal has upheld the disallowance by treating it as a capital expenditure. the order of the tribunal is in conformity with the law laid down by this court in beco engineering co. ltd. v. c1t .12. accordingly, this question is also answered in the affirmative, i.e., in favour of the revenue and against the assessee.13. the assessee was to receive a royalty of rs. 3,60,396 and rs. 8,60,302 for the assessment years 1976-77 and 1977-78, respectively, from a tanzanian party. the said party withheld the amounts of rs. 60,000 and rs. 70,000 for the two years, respectively, on account of tax payable in that country. the assessee claimed that the entire amount of rs. 3,60,396 and rs. 8,60,302 was deductible under the provisions of section 80-o of the act, whereas, the assessing officer held that deduction was to be confined only to the amounts which had actually been brought into india in convertible foreign exchange. he, therefore, disallowed the claim of the assessee to the extent of rs. 60,000 and rs. 77,000 for the two years, respectively. the tribunal referred to the provisions of section 80-o of the act to hold that the exemption therein was available only in respect of the amounts received in india in convertible foreign exchange. accordingly, it upheld the action of the assessing officer in denying the claim of exemption under this provision in respect of the sums of rs. 60,000 and rs. 77,000, which had, admittedly, not been brought into india. section 80-o of the act reads as under :'where the gross total income of an assessee, being an indian company or a person (other than a company) who is resident in india, includes any income received by the assessee from the government of a foreign state or foreign enterprise in consideration for the use outside india of any patent, invention, design or registered trade mark and such income is received in convertible foreign exchange in india, or having been received in convertible foreign exchange outside india, or having been converted into convertible foreign exchange outside india, is brought into india, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to the provisions of this section 2 deduction of an amount equal to--(i) forty per cent. for an assessment year beginning on the 1st day of april, 2001 ;(ii) thirty per cent. for an assessment year beginning on the 1st day of april, 2002 ;(iii) twenty per cent. for an assessment year beginning on the 1st day of april, 2003 ;(iv) ten per cent. for an assessment year beginning on the 1st day of april, 2004, of the income so received in, or brought into, india, in computing the total income of the assessee and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of april, 2005, and any subsequent assessment year :provided that such income is received in india within a period of six months from the end of the previous year, or within such further period as the competent authority may allow in this behalf :provided further that no deduction under this section shall be allowed unless the assessee furnishes a certificate, in the prescribed form, along with the return of income, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.explanation.--for the purposes of this section,--(i) 'convertible foreign exchange' means foreign exchange which is for the time being treated by the reserve bank of india as convertible foreign exchange for the purposes of the law for the time being in force for regulating payments and dealings in foreign exchange ;(ii) 'foreign enterprise' means a person who is a non-resident;(iii) services rendered or agreed to be rendered outside india shall include services rendered from india but shall not include services rendered in india ;(iv) 'competent authority' means the reserve bank of india or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.'14. a plain reading of the aforesaid provision shows that the exemption is available only in respect of an amount which is actually received in convertible exchange in india. similar view has been taken by the bombay high court in cit v. asian cable corporation ltd. (no. 2) : [2003]262itr537(bom) and the calcutta high court in cit v. m. n. dastur and co. (p.) ltd. [2000] 243 itr 10.15. accordingly, question no. 3 is answered in the affirmative, i.e., against the assessee and in favour of the revenue.16. question no. 4 relates to the disallowance of claim of weighted deduction claimed under section 35b of the act, on freight and transportation and packing expenses and in respect of part of salaries.17. the finding of the tribunal is in conformity with the decision of this court in cit v. export house , wherein the law laid down by the apex court in cit v. stepwell industries ltd. : [1997]228itr171(sc) and cit v. hero cycles pvt. ltd. : [1997]228itr463(sc) , has been followed. counsel for the assessee has not been able to controvert this position.18. accordingly, question no. 4 is answered in the affirmative, i.e., in favour of the revenue and against the assessee.19. question no. 5 relates to disallowance of surtax. this disallowance is in conformity with the low laid down by the apex court in smith kline and french (india) ltd.v. cit : [1996]219itr581(sc) . similar disallowance has been upheld by this court on the basis of the judgment of the apex court in h.m.m. ltd. (formerly known as hindustan milk food .) v. cit and h.m.m. ltd.v. cit .20. accordingly, this question is also answered in the affirmative, i.e., in favour of the revenue and against the assessee.21. vide question no. 6, disallowances of rs. 6,906 and rs. 2,709 for the assessment years 1976-77 and 1977-78, respectively, have been questioned.22. the assessee had incurred legal expenses of rs. 11,906 and rs. 7,709 in connection with the income-tax proceedings for the assessment years 1976-77 and 1977-78, respectively. the assessing officer restricted the claim under section 80vv of the act to rs. 5,000 in each of the two years and made the disallowances of rs. 6,906 and rs. 2,709, respectively, for the assessment years 1976-77 and 1977-78.23. the disallowance was challenged before the commissioner of income-tax (appeals) on the ground that since the entire amount had been incurred wholly and exclusively for the purpose of the assessee's business, the same was fully allowable under section 37 of the act. the commissioner of income-tax (appeals) did not accept this contention as according to him, even if the expenditure had been incurred wholly and exclusively for the purpose of business, the same had to be restricted in terms of the provisions of section 80vv of the act to rs. 5,000 only. this finding has been affirmed by the tribunal.24. section 80vv of the act, as it existed at the relevant time, reads as under :'80vv. in computing the total income of an assessee, there shall be allowed by way of deduction any expenditure incurred by him in the previous year in respect of any proceedings before any income-tax authority or the appellate tribunal or any court relating to the determination of any liability under this act, by way of tax, penalty or interest : provided that no deduction under this section shall, in any case, exceed in the aggregate five thousand rupees.'25. a plain reading of the above provision shows that the deduction on account of expenditure incurred by an assessee on any proceedings before any income-tax authority or the appellate tribunal or any court relating to the determination of any liability under the income-tax act, has to be restricted 'in the aggregate' to rs. 5,000 only.26. counsel for the assessee has placed reliance on the decision of the gujarat high court in saurashtra cement and chemical industries ltd. v. cit : [1995]213itr523(guj) , to contend that the limit of rs. 5,000 specified in section 80vv of the act is in respect of one case only. according to him, since the legal expenses pertained to more than one case, therefore, the assessee was entitled to claim deduction under this provision at the rate of rs. 5,000 per case.27. we have already observed that the plain language of section 80vv leaves no scope for such an interpretation. we have, therefore, our reservations about the correctness of the view taken by the gujarat high court in the case of saurashtra cement and chemical industries ltd.v. cit : [1995]213itr523(guj) . we may also mention that no details are available on the record to show that the expenses claimed by the assessee pertained to more than one case.28. in view of the above, we are satisfied that the view taken by the tribunal is correct and does not call for any interference. consequently, we answer question no. 6 also in the affirmative, i.e., in favour of the revenue and against the assessee.29. the petition is, accordingly, disposed of.