Appellant/Respondent v. Respondent/Appellant

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 14.12.2009 CORAM : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN AND THE HONOURABLE MR.JUSTICE M.M.SUNDRESH TAX CASE (APPEAL) NO.470 OF 2004 The Commissioner of Income tax II,Coimbatore. Appellant/Respondentv.Respondent/Appellant The Coonoor Tea Estates Company Ltd.,Coonoor 1.Respondent/AppellantTax Case Appeal filed under section 260A of the Income taxAct, 1961 against the order of the Income Tax Appellate Tribunal,'C' Bench, Chennai, dated 20.10.2003 made in ITA No.2238/Mds/1996for the Assessment year 1994-95, against the Order of theCommissioner of Income Tax (Appeals), Coimbatore dated. 29.08.96made in I.T.Appeal No.771-C/95-96, against the order of the DeputyCommissioner of Income Tax, Special Range-II, Coimbatore dated.12.11.1995 made in PAN.CZ-0358/SE.II/CBEFor appellant:Mr.T.Ravikumar,Standing Counsel for Income tax DepartmentFor respondent :Mr.R.Venkata Narayanan, forM/s. Subbaraya Aiyar JUDGMENT (Judgment of the Court was delivered byK.RAVIRAJA PANDIAN, J.) This appeal is at the instance of the revenue against theorder of the Income Tax Appellate Tribunal dated 20.10.2003 made inITA No.2238/Mds/1996. for the assessment year 1994-95. 2. The appeal was admitted on the following substantialquestion of law : "Whether, on the facts and in the circumstances of the case,the Income tax Appellate Tribunal was right in law inholding that the assessing officer was not justified inhttps://hcservices.ecourts.gov.in/hcservices/disallowing the depreciation on tea bushes while processing the return of income of the assessment year 1994-95 inaccordance with the amendment made to the Finance Act, 1995as per which tea bushes were taken out of the definition ofplant?" 3. The facts : The assessee company is engaged in thebusiness of manufacture and sale of tea. For the assessment year1994-95, the assessee filed its return of income on 30.11.1994showing a total income of Rs.14,00,230/-. While processing thereturn under section 143(1)(a) of the Act, the assessing officerfound that the assessee had claimed depreciation of Rs.56,03,148/-instead of the correct figure of Rs.7,26,115/-. The definition ofplant was modified with retrospective effect by Finance Act, 1995,as per which tea bushes were not considered as plant. The excessclaim of depreciation as per working given by the assessing officerwas Rs.48,77,033/-. This was added back by way of adjustment undersection 143(1)(a) of the Act and the total income was determined atRs.62,77,260/-, additional tax under section 143(1)(a) atRs.5,04,772/- was levied consequently. 4. Aggrieved by the order of the assessing officer, theassessee filed an appeal before the Commissioner of Income Tax(Appeals), who confirmed the order of the assessing officer.Aggrieved by that, the assessee filed further appeal before theTribunal by contending that the disallowance of depreciation on teabushes did not come udner the category of'prima facie'disallowance. Therefore, no adjustment under section 143(1)(a)could be made on that account. Reliance was placed on the decisionof the Supreme Court in the case of CIT v. Hindustan ElectroGraphites Ltd., 243 ITR 48. The Tribunal, accepting the contentionof the assessee, allowed the appeal. The correctness of the sameis now canvassed by the revenue in this appeal. 5. We heard the learned counsel on either side and perused thematerials available on record. 5. We heard the learned counsel on either side and perused thematerials available on record. 6. We are of the view that the adjustment made by theassessing officer confirmed by the Commissioner of Appeals cannotbe done while processing the assessment under section 143(1)(a) ofthe Act as the disallowance made by the authority would not comeunder the category of 'prima facie' adjustment. The law obtainingduring the relevant period did not recognise tea bushes as plantand machinery. As such, it is only a debatable issue. It is alsoa settled principle of law that where a return is filed, the lawapplicable would be the law as it stood on the date of filing ofthe return. The retrospective amendment made to the definition ofplant introduced by the Finance Act, 1995 for the assessment year1994-95 was not available to make the disallowance under primafacie adjustment. Useful reference can be had to the decision inthe case of CIT v. Hindustan Electro Graphites Ltd., 243 ITR 48. https://hcservices.ecourts.gov.in/hcservices/ 7. In the light of what is stated above, we do not find anyirregularity in the order of the Tribunal for us to take adifferent view. The question of law is answered in favour of theassessee and against the revenue. The appeal is dismissed. Nocosts. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarmfTo1. The Assistant Registrar, Income Tax Appellate Tribunal, 'C' Bench, Besant Nagar, Chennai.2. The Commissioner of Income Tax (Appeals), Coimbatore.3. The Deputy Commissioner of Income Tax, Special Range-II, Coimbatore.4. The Commissioner of Income TaxII, Coimbatore.5. The Section Officer, VR Section, High court, madrasT.C. (A) No.470 of 2004BVN (CO)SS (31.12.2009)