COMMISSIONER OF INCOME-TAX VS MAHAVIR CONSTRUCTION CO.
1999 P T D 2609
[228 I T R 407]
[Madhya Pradesh high Court (India)]
Before A. K. Mathur, C.J. and S. K. Kulshrestha, J
COMMISSIONER OF INCOME-TAX
Versus
MAHAVIR CONSTRUCTION CO.
Miscellaneous Civil Case No.247 of 1994, decided on 10/07/1996.
Income-tax---
----Business---Depreciation---New business or part of existing business-- Tests---Finding by Tribunal that contract work did not constitute new business---Tribunal justified in granting depreciation for twenty-three months---Indian Income Tax Act, 1961, Ss.28 & 32.
The assessee-firm was engaged in the execution of various contract works. During the year under consideration, the firm was awarded a new contract known as "reclamation and screening of iron ore at Aridongari" by Bhilai Steel Plant by order, dated January 20, 1988. For execution of this contract, the assessee purchased poclain machinery. The Assessing Officer allowed depreciation can poclain machine for a period of 14 months as against 23 months claimed, by the assessee. However, the Tribunal granted depreciation on poclain machinery for a period of 23 months. On a reference:
Held, that, the Tribunal had rightly held that what has to be seen is the head of income and commonality of the purpose. The Tribunal took the view that the common fund was utilised and it was in the common pool, finances were made available to the poclain business started at different dates. The Tribunal was justified in holding that the contract awarded by Bhilai Steel Plant was not a new source of income within the meaning of the second proviso to. subsection (2) of section 3 of the Income Tax Act, 1961. The assessee was entitled to depreciation on the poclain machinery for a period of twenty-three months.
Bansidhar Private Ltd. v. CIT (1981) 127 ITR 65 (Guj.) applied.
V.K. Tankha for the Commissioner.
B. L. Nema for the Assessee.
JUDGMENT
This is an income-tax reference under section 256(1) of the Income Tax Act, 1961, at the instance of the Revenue and the following two questions of law have been referred by the Tribunal for answer by this Court:
(i) Whether, on the (acts and in the circumstances of the case, the Tribunal was justified in holding that the contract awarded by Bhilai Steel Plant was not a new source of income within the meaning of the second proviso to subsection (2) of section 3 of the Income Tax Act, 1961?
(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in directing to allow depreciation of Poclain machinery for a period of 23 months as against 14 months?"
The assessee is a registered firm and is engaged in the execution of various contract works. During the year under consideration, the firm was awarded a new contract known as "reclamation and screening of iron ore at Aridongari" by Bhilai Steel Plant by order, dated January 20, 1988. For execution of this contract, the assessee purchased Poclain machinery which was delivered at Aridongari and used for the execution of the new contract. The Assessing Officer allowed depreciation on Poclain machine for a period of 14 months as against 23 months claimed by the assessee in accordance with section 3 of the Income Tax Act, 1961, with effect from April 1, 1989. This finding of the Assessing Officer was upheld by the Commissioner of Income-tax (Appeals). Thereafter, the assessee approached the Tribunal and the Tribunal granted a depreciation on poclain machinery for a period of 23 months. Hence, the Revenue has approached the Tribunal for referring the aforesaid two questions for answer by this Court and the-Tribunal- has referred the same to this Court for its answer.
We have heard learned counsel and perused the order of the Tribunal. The Tribunal has made a, pragmatic approach. The Tribunal has rightly found that what has to be seen is the head of income and commonality of the purpose. Referring to the decision of the Gujarat High Court in the case of Bansidhar Private Ltd. v. CIT (1981) 127 ITR 65, the Tribunal took the view that the common fund was utilised and it was in the common pool, finances were made available to the poclain business started at different dates. The test which has been laid down by the Gujarat High Court and followed by the Tribunal appears to be justified. If that is not the correct view, then if a new business is started, it would constitute a separate business and that is not the intention. Therefore, what is to be seen is that if the finances are made available from the common pool and management is by a common management, then it will appear that from a common hand, so many business can be started. In this view of the matter,- we are of the opinion that the view taken by the Tribunal appears to be well-founded and both the questions are answered against the Revenue and in favour of the assessee.
M.B.A./3010/FCReference answered.