Commissioner Of Income-Tax vs Rani Shaver Poultry Breeding ...
2001 Latest Caselaw 848 Del

JUDGMENT

Arijit Pasayat, C.J.

1. The following question has been referred at the instance of the Revenue under Section 256(1) of the Income-tax Act, 1961 (in short "the Act"), by the Income-tax Appellate Tribunal, Delhi Bench "D", Delhi (in short "the Tribunal"), for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, and having regard to Clause 6 of the partnership deed dated April 1, 1966, the hire charges receivable from the firm should be taken at Rs. 1,24,379 as provided in the books of account or at Rs. 1,87,416 equivalent to the depreciation claimed and allowed under the Income-tax Act, 1961 ?"

2. The dispute relates to the assessment year 1976-77.

3. The factual position in a nutshell is as follows :

The assessed, a private limited company, had been carrying on poultry farm business since the accounting year 1961-62. On April 1, 1966, the assessed-company entered into a partnership arrangement with one Major General R. N. Mehra for running the farm on partnership basis. Such business was to be carried on under the name and style of Rani Poultry Breeding Farms. Clause 6 of the partnership deed, with which we are concerned, reads as follows :

"6. With regard to the capital of the partnership it is agreed by and between the partners as under :

The party of the first part, i.e., Rani Shaver Poultry Breeding Farms Private Limited, will make available to the firm the use of the assets as per Schedule A attached belonging to it for the period of the duration of this partnership. It is also agreed between the partners that an amount equal to the depreciation on the movable and immovable assets belonging to the party of the first part shall be paid by the firm to the party of the first part as hire charges for the use of those assets and the amount of such hire charges will be debited to the profit and loss account as an expense of the partnership before determining the net profit or loss of the firm . . ."

4. The partnership had adopted the financial year as the year of accounting and for the assessment year 1967-68, it ended on March 31, 1967. The accounting year of the assessed-company, however, ended on October 31, 1966. While preparing accounts for the year ending on October 31, 1966, the assessed-company credited the hire charges for seven months. Though initially the income was assessed at a negative figure, subsequently proceedings under Section 147 of the Act were initiated and the hire charges were taken at a higher figure. The matter was carried in appeal by the assessed before the Appellate Assistant Commissioner of Income-tax (in short "the AAC"). The said authority held that the Assessing Officer was not justified in reopening the proceedings to take the hire charges at a higher figure. The Revenue carried the matter in appeal before the Tribunal and by its order dated June 30, 1975, in I. T. A. No. 4397 (Delhi) of 1974-75, the Revenue's appeal was dismissed. The matter was carried in reference before this court under Section 256(1) of the Act and was the subject-matter of I. T. R. No. 148 of 1976. The same was disposed of by judgment dated September 27, 1984. So far as the dispute relating to the present year is concerned, the Tribunal followed its earlier order and dismissed the Revenue's appeal. It may be noted here that though the dispute in the assessment year 1967-68 was somewhat different from the one involved for the year 1976-77, both the Appellate Assistant Commissioner and the Tribunal felt that the issue was similar and dealt with it in the background of the decision taken for the assessment year 1967-68. On being moved for a reference, the question as set out above has been referred for opinion of this court.

5. Learned counsel for the Revenue submitted that the factual background of the present assessment year is different from the previous assessment year and both the Appellate Assistant Commissioner and the Tribunal went wrong in following the earlier orders. Learned counsel for the asses-see, on the other hand, submitted that though the dispute for the assessment year 1967-68 was somewhat different, the principles as indicated by this court in its judgment in I. T. R. No. 148 of 1976 are fully applicable.

6. Without going into the question whether the issues were identical or different, it has to be noted that Clause 6 quoted above dealt specifically with the amount which has to be debited to the profit and loss account as expenses of the partnership. That being so, the determination of the hire charges was to be the amount as was debited to the profit and loss account. Undisputedly what was debited to the profit and loss account was Rs. 1,24,378. What the assessed seems to have done before the Assessing Officer was to claim notional depreciation for the assessment years 1968-69 to 1976-77 and re-adjust the written down value. Consequently, it had claimed that the depreciation to be allowed was Rs. 1,87,416. This exercise undertaken by the assessed does not in any way affect the requirement of Clause 6 which specifically dealt with the amount to be debited to the profit and loss account Obviously, what was debited to the profit and loss account as depreciation and hire charges was the determinative factor. In that view of the matter, our answer to the question is in the affirmative, in favor of the assessed and against the Revenue.

7. The reference stands disposed of.