The Commissioner Of Income Tax Coimbatore v. M/S. Sakthi Finance Ltd. Coimbatore

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 02.01.2007 CORAM THE HONOURABLE MR.JUSTICE P.D.DINAKARANANDTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN Tax Case (Reference) Nos.87 to 94 of 2001 The Commissioner of Income TaxCoimbatore...Applicant in all T.Cs.Vs. M/s. Sakthi Finance Ltd.Coimbatore. ..Respondent in all T.Cs. For Applicant::Mr.T.RavikumarFor Respondent ::Mr.R.Vijayaraghavan Tax cases referred to the High Court by the Income-Tax AppellateTribunal under section 256(1) of the Indian Income Tax Act 1992 (Act XI of1992) in R.A Nos.253 to 260/Mds/97 in I.T.A. Nos.3206/Mds/90, 1996/Mds/91,2175/Mds/95, 2174/Mds/93, 1573/Mds/96, 1574/Mds/96, 1338/Mds/96 and2586/Mds/92 for the assessment years 1987-88, 1988-89, 1990-91, 1991-92,1992-93, 1993-94 and 1989-90 on its file for decision on the followingquestions of law viz., (i) “Whether on the facts and in the circumstances of the case, theTribunal was right in law and had valid material to come to the conclusionthat the lesess were aware that what they paid was only contingent depositand that it was to be returned to them if the sales tax levy on theassessee were to be declared as unconstitutional. When there is noreference to the fact in the bills issued by the assessee to the leaseeand when there is no material on recod apart from a unilateral letterwhich does not confer any contractual right on the lessee, leading to theconclusion that the lessee was award of his legal right to receive suchrefund ?" (2) “Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the amounts collected by theassessee from lessess towards sales tax represented only contingentdeposits?” (TC(R) NOS. 87 and 93 of 2001) (i) “Whether on the facts and in the circumstances of the case, theTribunal was right in law and had valid material to come to the conclusionthat the lessess were aware that what they paid was only contingentdeposit and that it was to be returned to them if the sales tax levy onhttps://hcservices.ecourts.gov.in/hcservices/ the assessee were to be declared as unconstitutional. When there is noreference to the fact in the bills issued by the assessee to the leaseeand when there is no material on record apart from a unilateral letterwhich does not confer any contractual right on the lessee, leading to theconclusion that the lessee was award of his legal right to receive suchrefund ?" (2) “Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the amounts collected by theassessee from lessess towards sales tax represented only contingentdeposits and therefore quashing the directions of the commissioner ofIncome-tax under Sec. 263 on this issue?” (TC(R) NOS. 88 of 2001) 1) "Whether on the facts and in the circumstances of the case, theTribunal was right in law and had valid material to come to the conslusionthat the lessess were aware that what they paid was only contingentdeposit and that it was to be returned to them if the sales tax levy onthe assessee were to be declared as unconstitutional when there is norerefence to the fact in the bills issued by the assessee to the lesseeand when there is no material on record apart from a unilateral letterwhich does not confer any contractual right on the lessee, leading to theconclusion that the lessee was aware of his legal right to receive suchrefund?" 2) "Whether, on the facts and in the circumsances of the case, theTribunal was right in law in holding that the amount collected by theassessee from lessee towards sales-tax represented only contingentdeposits?" 3) "Whether on the facts and in the circumstances of the case theTribunal was right in law in holding that the assessee is entitled asrevenue deduction under Sec.37(1) the expenditure incurred by it inpatitions, false ceiling etc. in the assessee's own premises used forhousing lockers?' 2) "Whether, on the facts and in the circumsances of the case, theTribunal was right in law in holding that the amount collected by theassessee from lessee towards sales-tax represented only contingentdeposits?" 3) "Whether on the facts and in the circumstances of the case theTribunal was right in law in holding that the assessee is entitled asrevenue deduction under Sec.37(1) the expenditure incurred by it inpatitions, false ceiling etc. in the assessee's own premises used forhousing lockers?' 4) "Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the assessee is entitled todepreciation at the rate aplicable to a plant at 33 1/3 on its buildingshousing the sale deposit lockers?" (TC(R).No.89 of 2001) (1) "Whether on the facts and in the circumstances of the case, theTribunal was right in law and had valid material to come to the conclusionthat the lessees were aware that what they paid was only contingentdeposit and that it was to be returned to them if the sales tax levy onthe assessee were to be declared as unconstitutional, when there is noreference to the fact in the bills issued by the assessee to the lesseeand when there is no material on record apart from a unilateral letterhttps://hcservices.ecourts.gov.in/hcservices/ which does not confer any contractual right on the lessee, leading to theconclusion that the lessee was aware of his legal right to receive suchrefund?" 2)"Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the amount collected by theassessee from lessees towards sales tax represented only contingentdeposits (and therefore questioning the directions of the Commissioner ofIncome-Tax under section 263 on this issue?") 3) " Whether on the facts and in the circumstances of the case theTribunal was right in law in holding that the assessee is entitled asrevenue deduction under sec.37(1) the expenditure incurred by it inpartitions, false ceiling etc. in the assessee's own permises used forhousing lockers?" 4)" Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the assessee is entitled todepreciation at the rate applicable to a plant at 33 1/3% on its buildingshousing the safe deposit lockers?" 5." Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the expenditure incurred onfalse ceiling, partition etc. in the assessee's lease hold premises wererevenue in nature?" (TC (R) No.90 of 2001) [1] “Whether on the facts and in the circumstances of the case, theTribunal was right in law and had valid material to come to the conclusionthat the lessees were aware that what they paid was only contingentdeposit and that it was to be returned to them if the sales tax levy onthe assessee were to be declared as unconstitutional, when there is noreference to the fact in the bills issues by the assessee to the lesseeand when there is no material on record apart from a unilateral letterwhich does not confer any contractual right on the lessee, leading to theconclusion that the lessee was aware of his legal right to receive suchrefund?” [2] “Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the amount collected by theassessee from lessees towards sales tax represented only contingentdeposits [ and therefore questioning the directions of the Commissioner ofIncome-tax under Section 263 on this issue?” [3] “Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the assessee is entitled asrevenue deduction under Section 37[1] the expenditure, incurred by it inpartitions, false ceiling etc. in the assessee's own premises used forhousing lockers?” https://hcservices.ecourts.gov.in/hcservices/ [2] “Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the amount collected by theassessee from lessees towards sales tax represented only contingentdeposits [ and therefore questioning the directions of the Commissioner ofIncome-tax under Section 263 on this issue?” [3] “Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the assessee is entitled asrevenue deduction under Section 37[1] the expenditure, incurred by it inpartitions, false ceiling etc. in the assessee's own premises used forhousing lockers?” https://hcservices.ecourts.gov.in/hcservices/ [4] “Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the assessee is entitled todepreciation at the rate applicable to a plant at 33 1/3% on its buildingshousing the safe deposit lockers?” [TC[R] No.91/2001] 1. "whether on the facts and in the circumstances of the case, theTribunal was right in law and had valid material to come to the conclusionthat the lessees were aware that what they paid was only contingentdeposit and that it was to be returned to them if the sales tax levy onthe assessee were to be declared as unconstitutional, when there is noreference to the fact in the bills issued by the assessee to the lesseeand when there is no material on record apart from a unilateral letterwhich does not consider any contractual right on the lessee, leading tothe conclusion that the lessee was aware of his legal right to receivesuch refund?" 2. "Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the amounts collected by theassessee from lessees towards sales-tax represented only contingentdeposits?" 3. "Whether on the facts and in the circumstances of the case theTribunal was right in law in holding that the assessee is entitled todepreciation at the rate applicable to a plant at 33 1/3% on its buildingshousing the safe deposit lockers?" (TC (R) Nos. 92 and 94 of 2001) arising out of order dated 17.8.1995, 29.9.1995, 14.9.1992, 13.7.93,12.10.1995 and 4.6.1996 in ITA.Nos.290-C & 291-C for the Assessment years94-95, 290-C & 291-C for the Assessment year 94-95; 545-C for theAssessment year 92-93, 138-C for the Assessment year 93-94 292 G for theAssessment year 94-95 256A-C for the Assessment year 95-96 127-C for theAssessment year 96-97 on the file of the Commissioner of Income Tax(Appeals) Coimbatore respectively as against order date 30.3.94, 30.3.94,27.3.1992, 30.3.1993, 30.3.1994, 28.5.95 and 22.3.1996 in PAN/GIR.No.CU-0166 for the Assessment year 87-88, PAN/GIR.No.C2-0166 for the Assessmentyear 88-89, PAN/GIR.No.C2-0166 for the Assessment year 89-90, PAN/GIR.No.C2-0166/SR I/CBE for the Assessment year 90-91,PAN/GIR.No.C2-0166 for the Assessment year 91-92,PAN/GIR.No.C2-0166/SRI/CBE for the Assessment year 92-93,PAN/GIR.No.CU-0166/SRI/CBE for the Assessment year 93-94, on the file ofthe Deputy Commissioner of Income Tax, Spl Range I, Coimbatorerespectively. These referebce cases coming on for hearing on this day upon perusingthe order of Reference of the Income-Tax Appellate Tribunal Ms 'B' Benchdated 24.01.2001. The Statement of the case dated 17.12.1999 submitted bythe Income-Tax Appellate Tribunal and the Record in the case and uponhearing the arguments of Mr.T.Ravikumar Special Counsel for Income-Tax onhttps://hcservices.ecourts.gov.in/hcservices/ behalf of the Applicant in TCs and of Mr.r.Vijayaraghavan, Advocate forthe Respondent in all TCs the Court delivered the following Judgment.J U D G M E N T (Delivered by P.D.DINAKARAN,J.) These referebce cases coming on for hearing on this day upon perusingthe order of Reference of the Income-Tax Appellate Tribunal Ms 'B' Benchdated 24.01.2001. The Statement of the case dated 17.12.1999 submitted bythe Income-Tax Appellate Tribunal and the Record in the case and uponhearing the arguments of Mr.T.Ravikumar Special Counsel for Income-Tax onhttps://hcservices.ecourts.gov.in/hcservices/ behalf of the Applicant in TCs and of Mr.r.Vijayaraghavan, Advocate forthe Respondent in all TCs the Court delivered the following Judgment.J U D G M E N T (Delivered by P.D.DINAKARAN,J.) T.C.(R) No.87 of 2001 has been preferred against R.A.No.253/Mds/97with reference to the assessment year 1987-88, T.C.(R) No.88 of 2001 hasbeen preferred against R.A.No.254/Mds/97 with reference to the assessmentyear 1988-89, T.C.(R) No.89 of 2001 has been preferred againstR.A.No.255/Mds/97 with reference to the assessment year 1988-89, T.C.(R)No.90 of 2001 has been preferred against R.A.No.256/Mds/97 with referenceto the assessment year 1990-91, T.C.(R) No.91 of 2001 has been preferredagainst R.A.No.257/Mds/97 with reference to the assessment year 1991-92,T.C.(R) No.92 of 2001 has been preferred against R.A.No.258/Mds/97 withreference to the assessment year 1992-93, T.C.(R) No.93 of 2001 has beenpreferred against R.A.No.259/Mds/97 with reference to the assessment year1993-94 and T.C.(R) No.94 of 2001 has been preferred againstR.A.No.260/Mds/97 with reference to the assessment year 1989-90. 2. The above batch of references has been made under Section 256(1) ofthe Income-tax Act, 1961, by the Income-tax Appellate Tribunal, ChennaiBench 'B', at the instance of the Commissioner of Income-tax, Coimbatore,raising substantial questions of law, referred to and dealt withhereunder, arising out of the common order dated 10.1.1997 of the Income-tax Appellate Tribunal, Chennai Bench 'B'. In pursuance of thedirections of this Court, the Income-tax Appellate Tribunal has stated acase. T.C.(R) Nos.87 of 2001 and 93 of 2001 (R.A.Nos.253 and 259/Mds/97 withreference to the assessment years 1987-88 and 1993-94: 3.1. In respect of T.C.(R) Nos.87 of 2001 and 93 of 2001 withreference to the assessment years 1987-88 and 1993-94, the Tribunal hasreferred the following question of law for our consideration: “Whether on the facts and in the circumstances of thecase, the Tribunal was right in law in holding that theamounts collected by the assessee from lessees towardssales tax represented only contingent deposits ?" 3.2. During the relevant assessment years, the assessing officeradded the contingent deposit collected by the assessee as a businessincome, even though the assessee claimed the contingent deposit as arevenue receipt. According to the assessee, the contingent depositcollected by them could not be assessed to tax as a part of tradingreceipt, as the said deposit does not belong to the assessee at all and ismeant for the payment of sales tax proposed to be levied by the StateGovernment. On the other hand, the Revenue contended that the amountcollected as contingent deposit towards the sales tax payable by thehttps://hcservices.ecourts.gov.in/hcservices/ assessee is still open to be assessed to tax, since till such sales tax ispaid by the assessee out of the contingent deposit, such deposit formspart of the assessee's income. But the assessing officer invoking Section43B of the Income-tax Act, 1961, disallowed the claim of the assesseeholding that the contingent deposit is nothing but sales-tax collectedfrom the lessees on lease rentals and not paid to the Government andhence, it has to be disallowed under Section 43B and accordingly, addedthe contingent deposit to the assessee's income. assessee is still open to be assessed to tax, since till such sales tax ispaid by the assessee out of the contingent deposit, such deposit formspart of the assessee's income. But the assessing officer invoking Section43B of the Income-tax Act, 1961, disallowed the claim of the assesseeholding that the contingent deposit is nothing but sales-tax collectedfrom the lessees on lease rentals and not paid to the Government andhence, it has to be disallowed under Section 43B and accordingly, addedthe contingent deposit to the assessee's income. 3.3. Aggrieved by the said order of the assessing officer, theassessee preferred appeals before the Commissioner of Income-tax (Appeals)who, by order dated 17.8.1995, upheld the disallowance of the claim of theassessee. The Commissioner observed that it is not disputed that theTamilnadu Sales-tax Department has levied the said tax on the appellant inrespect of its lease rentals received from the customers. The amount oftax payable has also been quantified and the like amount has also beencollected from the customers as a measure of precaution. The commissionerfurther observed that in the event of the appellant's claim of exemptionfrom the said liability is ultimately upheld and became final then thecustomers might get the amount paid by them individually refunded to themunder a contractual obligation. The Commissioner also observed that thestatutory liability is never a contingent liability and it will not ceaseto exist by reason of the fact that the taxpayer is disputing theliability. But, the statutory liability ceased to exist when a competentcourt strikes down the vires of the provisions imposing the levy of salestax on lease rentals. The Commissioner further observed that even thoughthis Court stayed the operation of the provision of sales tax in respectof lease rentals in a writ petition filed by the assessee, the same hasnot been finally disposed of and in the case of a contractual liability,the liability will accrue only in the year in which the dispute is finallysettled between the parties. But, the Commissioner distinguishes the saidproposition with the statutory liability, as it is not even a case wherethe collection was made towards possible proceedings by the sales taxdepartment and it is the collection of a quantified amount as per theactual proceedings of the sales tax department. The Commissioner,ultimately, held that though the assessee called it as contingent deposit,the same cannot be accepted because the customers when they paid theamounts they have paid with the awareness that what they paid is towardsthe possible sales tax on lease rentals and accordingly, held that as persection 43B of the Act, inasmuch as the collected amount has not been paidtowards the credit of the Government, the disallowance has been rightlymade. The Commissioner also observed that if the assessee ultimatelysucceed in their dispute and refund the collected amount to the customers,it is open to them to claim the deduction of the amount appropriately inthat year. 3.4. However, on further appeals by the assessee against the saidorder of the Commissioner dated 17.8.95, the Income-tax AppellateTribunal, by order dated 10.1.1997, recording the undertaking given by theassessee that they would refund the amount if the proposed levy of salestax was struck down as unconstitutional by the Courts, held that thehttps://hcservices.ecourts.gov.in/hcservices/ Revenue was not at all justified in disallowing the contingent depositinvoking Section 43B and also held that the said amount cannot be treatedas business receipt and accordingly, directed the assessing officer todelete the addition. 3.5. It is against the said order of the Tribunal, at the instance ofthe Commissioner of Income-tax, the Tribunal has stated a case andreferred the question of law referred to above. Revenue was not at all justified in disallowing the contingent depositinvoking Section 43B and also held that the said amount cannot be treatedas business receipt and accordingly, directed the assessing officer todelete the addition. 3.5. It is against the said order of the Tribunal, at the instance ofthe Commissioner of Income-tax, the Tribunal has stated a case andreferred the question of law referred to above. 4. Mr.T.Ravikumar, learned standing counsel appearing on behalf of theRevenue, relied upon the decision of this Court in COMMISSIONER OF INCOME-TAX v. SOUTHERN EXPLOSIVES CO. [(2000) 242 I.T.R. 107] and contended thatthe assessee having collected the amount to meet its statutory liabilitytowards sales tax proposed to be levied by the State Government on leaserentals and kept it as contingent deposit and having not paid the same tothe State Government, that amount cannot be claimed as a deduction, as theamount so collected partake of the character of trading receipt and solong as it remains with the assessee, deduction cannot be allowed and itshould be treated as income of the assessee. 5. On the other hand, the learned counsel appearing for the assesseerelying on the decision of the Apex Court in K.C.P. Limited v.COMMISSIONER OF INCOME-TAX [(2000) 245 I.T.R. 421] as well as the decisionof this Court in COMMISSIONER OF INCOME-TAX v. ARYA VAIDHYA PHARMACY(CBE) LTD. [(2006) 284 I.T.R. 335], contended that as the contingentdeposit collected by the assessee is associated with the liability torefund, it could not be taxed as a part of the trading receipt and hence,the amount was not assessable. 6.1. Of course, it is a settled law that as long as the receipt of theamount by the assessee was clearly associated with a liability to refundthe amount, such receipt of amount would not be characterised as an incomeand, therefore, the same cannot be taxed vide K.C.P. Ltd. v. CIT [(2000)245 I.T.R. 421 (SC)], referred supra. 6.2. Similar issue came up for consideration before this Court inCOMMISSIONER OF INCOME-TAX v. ARYA VAIDHYA PHARMACY (CBE) LTD. [(2006) 284I.T.R. 335], where the assessee had collected sales tax at 30% andretained it as a deposit without paying it to the State Government on theground that there was a dispute as to whether the ayurvedic medicines,viz., arishtams and asavas, manufactured by the assessee were subject tosales tax at 30% or 8% and after the decision of the Apex Court byjudgment dated 15.3.1989, holding that the said medicines were taxableonly at 8% with a direction to refund the excess amount to the customersto the extent it was possible and to donate the left over excess, whichcould not be refunded, to a charitable trust, this Court finding that theamount collected by the assessee was clearly associated with a statutoryliability and if such sales tax need not be paid, the said amount hadeither to be refunded to the customers or transferred to the charitabletrust, but the same could not be taxed as a part of the trading receipt. https://hcservices.ecourts.gov.in/hcservices/ https://hcservices.ecourts.gov.in/hcservices/ 6.3. But, the facts of the present case is totally different and isidentical to the facts of the case in COMMISSIONER OF INCOME-TAX v.SOUTHERN EXPLOSIVES CO. [(2000) 242 I.T.R. 107], cited supra, which isrelied upon by the Revenue. In the said case, the assessee was a dealerin explosive detonators and safety fuses and apart from collecting fourper cent of the price of the goods and paying it to the Government, italso collected further four per cent on the price of the goods as depositagainst sales tax, as though the said explosive detonators and safetyfuses might be treated as chemicals and as such higher rate of sales taxcould be collected by the Government. Even though the assessing officeraccepted the return of income, the Commissioner exercising his power underSection 263 of the Act, directed re-assessment and to include theadditional amount collected, which, on appeal by the assessee, wasnegatived by the Tribunal. Hence, on a reference made to this Court, itwas observed that the true character of a receipt must be judged withreference to the reasons for the collection, and the liability for meetingwhich the collection was made and when such liability is a statutoryliability, which the assessee was required to meet, and for meeting whichit was by the statute or authorities permitted to collect the amountrequired from its customers, the true character of the collection is atrading receipt. It was further observed that by calling a portion of theamount as deposit, it cannot be said that the assessee had constituteditself as a trustee, and therefore, the amounts received were not requiredto be regarded as part of its trading receipt. This Court, ultimately,held that the amounts collected by the assessee were amounts which weremeant to be utilised by the assessee for meeting its tax liability andeven if the assessee had paid over the entire amount received by it asdeposit towards sales tax to the State Government, it would still havebeen open to the assessee to seek refund, if the assessee wished to claimsuch refund on the ground that the tax had been levied at a higher ratethan the rate permissible. It was further held that the fact that theassessee had chosen to adopt the device of labelling a part of the amountscollected towards its sales tax liability as deposit could not make adifference and hence, the amount formed part of the assessee's income. 6.4. Even in the case of K.C.P. Ltd., [(2000) 245 I.T.R. 421 (SC)],cited supra, the Apex Court observed in clear terms that if the amount socollected is passed on to the State Government or refunded to thepurchasers, then the assessee would be entitled to claim deduction,meaning thereby that if the assessee had not paid, such deposit can bedisallowed under Section 43B of the Act, as the assessee had notdischarged his liability as per Section 43B of the Act. 6.5. Accordingly, the reference with regard to the question whetherthe amounts collected by the assessee from lessees towards sales taxrepresented only contingent deposits is answered in the negative, infavour of the Revenue and against the assessee. T.C.(R) No.88 of 2001 (R.A.No.254/Mds/97) with reference to the assessmentyear 1988-89: https://hcservices.ecourts.gov.in/hcservices/ 7.1. In respect of T.C.(R) No.88 of 2001 with reference to theassessment year 1988-89, the Tribunal has referred the following questionof law for our consideration: “Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the amounts collectedby the assessee from lessees towards sales tax represented onlycontingent deposits and therefore quashing the directions of theCommissioner of Income-tax under sec.263 on this issue ?" T.C.(R) No.88 of 2001 (R.A.No.254/Mds/97) with reference to the assessmentyear 1988-89: https://hcservices.ecourts.gov.in/hcservices/ 7.1. In respect of T.C.(R) No.88 of 2001 with reference to theassessment year 1988-89, the Tribunal has referred the following questionof law for our consideration: “Whether on the facts and in the circumstances of the case, theTribunal was right in law in holding that the amounts collectedby the assessee from lessees towards sales tax represented onlycontingent deposits and therefore quashing the directions of theCommissioner of Income-tax under sec.263 on this issue ?" 7.2. Pursuant to the order of the Commissioner under Section 263 ofthe Act, the assessing officer re-opened the assessment for the assessmentyear 1988-89 and added the amounts collected as contingent deposit towardssales tax on lease rentals, as has been done in the earlier assessmentyear 1987-88. The Tribunal quashed the direction of the Commissioner,following the reasons given in its earlier order for the assessment year1987-88 and hence, the above reference. 7.3. The issue raised in the above question is already answered inT.C.(R) Nos.87 and 94 of 2001 with reference to the assessment years 1987-88 and 1993-94. Accordingly, the reference with regard to the assessmentyear 1988-89 is answered in the negative, in favour of the Revenue andagainst the assessee. T.C.(R) No.89 of 2001 (R.A.No.255/Mds/97) with reference to the assessmentyear 1988-89: 8.1 In respect of T.C.(R) No.89 of 2001 with reference to theassessment year 1988-89, the Tribunal has referred the following questionsof law for our consideration: “1. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the amountscollected by the assessee from lessees towards sales taxrepresented only contingent deposits and therefore quashing thedirections of the Commissioner of Income-tax under sec.263 onthis issue ? 2. Whether on the facts and in the circumstances of the case theTribunal was right in law in holding that the assessee isentitled to revenue deduction under sec.37 (1) the expenditureincurred by it in partitions, false ceilings, etc. in theassessee's own premises used for housing lockers ? 3. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the assessee isentitled to depreciation at the rate applicable to a plant at 331/3rd on its buildings housing the safe deposit lockers ? " 8.2. Giving effect to the order of the Commissioner under Section 263of the Act, the claim of the assessee with regard to the amounts collectedhttps://hcservices.ecourts.gov.in/hcservices/ towards sales-tax from the lessees as contingent deposit was disallowedand added to the assessee's income by the assessing officer invokingsection 43B of the Act, as the same has not been paid to the Government.The claim of the assessee for treating the civil contributions to housesafe deposit lockers as 'plant' was also rejected and depreciation was notallowed at 33 1/3 %, but only at a lesser rate. The assessing officeralso disallowed the claim of the assessee towards the expenditure incurredon false ceiling, internal partition, etc. for lease hold and free holdbuildings as revenue in nature. On appeal, the Commissioner upheld theorder of the assessing officer with regard to the last two issues and thefirst issue was not dealt with by the Commissioner. The Tribunal, onappeal by the assessee, held all the three issues in favour of theassessee. Hence, the present reference with the questions referred toabove. 8.3. The issue referred in the first question is already answered inT.C.(R) Nos.87 and 94 of 2001 with reference to the assessment years 1987-88 and 1993-94. Accordingly, the reference with regard to the first issueis answered in the affirmative, in favour of the Revenue and against theassessee. 8.3. The issue referred in the first question is already answered inT.C.(R) Nos.87 and 94 of 2001 with reference to the assessment years 1987-88 and 1993-94. Accordingly, the reference with regard to the first issueis answered in the affirmative, in favour of the Revenue and against theassessee. 8.4. With respect to the issue referred in the second question, viz.,whether the assessee is entitled to revenue deduction under sec.37 (1) theexpenditure incurred by it in partitions, false ceilings, etc. in theirown premises, on an earlier occasion, a similar issue was referred at theinstance of the Revenue before this Court in COMMISSIONER OF INCOME-TAX v.OOTY DASAPRAKASH [(1999) 237 I.T.R. 902], wherein this Court held thatthe expenditure was incurred solely for repairs and modernising the hoteland replacing the existing components of the building, furniture andfittings, with a view to create a conducive and beautiful atmosphere forthe purpose of running the business of a hotel and that the expenditureincurred was not of an enduring nature and was allowable as revenueexpenditure under Section 37 of the Act. 8.5. In view of the above, the reference with regard to the secondissue is answered in the affirmative, in favour of the assessee andagainst the Revenue. 8.6. With respect to the third issue, viz., whether the assessee isentitled to depreciation at the rate applicable to a plant at 33 1/3rd onits buildings housing the safe deposit lockers, on a reference made by theRevenue with regard to the similar issue before the Delhi High Court inCOMMISSIONER OF INCOME-TAX v. PUNJAB AND SIND BANK, (2000) 244 I.T.R.393, the Delhi High Court observed as follows:- " The expression "plant" must be given a wide meaning havingregard to the fact that articles like books, scientificapparatus, surgical instruments are expressly included in thedefinition of plant. Its meaning is not confined only to anapparatus used in industry or business or manufacturing offinished goods from raw goods. In its ordinary meaning it is ahttps://hcservices.ecourts.gov.in/hcservices/ word of wide import and it must be broadly construed. Itincludes any article or object, fixed or movable, live or dead,used by a businessman for carrying on his business. It would notcover the stock-in-trade of a businessman. It would also notinclude an article which is a part of the premises in which thebusiness is carried on. An article to qualify as plant must havesome degree of durability and that which is quickly consumed orworn out in the course of future operation or within a short timecannot properly be called plant. In the ultimate analysis theenquiry which is to be made is as to what operation the apparatusperforms in the assessee's business. The relevant test to beapplied is: Does it fulfill the function of a plant in theassessee's trading activities ? And Is it a tool of thetaxpayer's trade ?" ... "The thing need not be a part of the machine used in themanufacturing process but could be merely an apparatus used incarrying on the business but having a degree of durability.Merely because the asset has a passive function in the carryingon of the business, it cannot be said that it is not plant. Itmay have a passive or an active role. The subject must have afunction in the trader's operation and if it has, it is, primafacie, plant, unless there is good reason to exclude it from thatcategory." 8.7. The Delhi High Court, in the said case, where the assessee, beinga banking company, claimed depreciation and development rebate in respectof safe deposit lockers, held that lockers were the primary safety articleof a bank used for the purpose of carrying on the trade and fell withinthe expression "plant" and accordingly, confirming the order of theTribunal, answered the reference in favour of the assessee and against theRevenue. 8.7. The Delhi High Court, in the said case, where the assessee, beinga banking company, claimed depreciation and development rebate in respectof safe deposit lockers, held that lockers were the primary safety articleof a bank used for the purpose of carrying on the trade and fell withinthe expression "plant" and accordingly, confirming the order of theTribunal, answered the reference in favour of the assessee and against theRevenue. 8.8. As the issue referred in the last question is already dealt withelaborately by the Delhi High Court in the decision cited supra, withwhich we are in full agreement, the reference is answered in theaffirmative, against the Revenue and in favour of the assessee. T.C.(R) No.90 of 2001 (R.A.No.256/Mds/97) with reference to the assessmentyear 1990-91: 9.1. In respect of T.C.(R) No.90 of 2001 with reference to theassessment year 1990-91, the Tribunal has referred the following questionsof law for our consideration: “1. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the amountscollected by the assessee from lessees towards sales taxrepresented only contingent deposits and (therefore questioningthe directions of the Commissioner of Income-tax under sec.263on this issue) ? https://hcservices.ecourts.gov.in/hcservices/ 2. Whether on the facts and in the circumstances of the case theTribunal was right in law in holding that the assessee isentitled as revenue deduction under sec.37 (1) the expenditureincurred by it in partitions, false ceilings, etc. in theassessee's own premises used for housing lockers ? 3. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the assessee isentitled to depreciation at the rate applicable to a plant at 331/3rd on its buildings housing the safe deposit lockers ? 4. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the expenditureincurred on false ceiling, partition, etc. in the assessee'slease hold premises were revenue in nature ? " 9.2. The assessing officer, while completing the assessment undersection 143(3) of the Act, during the assessment year 1990-91, invokingsection 43B of the Act, added the amounts collected by the assessee fromthe lessees on lease rentals as contingent deposit to the income of theassessee, as the same has not been paid to the Government. He alsodisallowed the claim of the assessee with regard to the depreciation onbuilding housing lockers at 33 1/3% treating it as plant and also treatedthe partitions, etc. made for housing lockers as furniture and fixturesand allowed depreciation as such. On appeal, the Commissioner upheld theaction of the assessing officer, but, on further appeal by the assessee,the Tribunal, following its earlier order, held the issues in favour ofthe assessee. Hence, the present reference with the questions referred toabove. 9.3. With respect to the first issue, it has already been answered inT.C.(R) Nos.87 and 93 of 2001 in the earlier portion of the judgment andhence, need not be dealt with again. Accordingly, the first issue isanswered in the negative, in favour of the Revenue and against theassessee. 9.4. With respect to the second issue, in T.C.(R) No.89 of 2001 forthe assessment year 1988-89, following the earlier decision of this Courton a reference made with regard to the similar issue in COMMISSIONER OFINCOME-TAX v. OOTY DASAPRAKASH [(1999) 237 I.T.R. 902], referred supra,the issue is answered in favour of the assessee. Following the same, thesecond issue is answered in the affirmative, in favour of the assessee andagainst the Revenue. 9.3. With respect to the first issue, it has already been answered inT.C.(R) Nos.87 and 93 of 2001 in the earlier portion of the judgment andhence, need not be dealt with again. Accordingly, the first issue isanswered in the negative, in favour of the Revenue and against theassessee. 9.4. With respect to the second issue, in T.C.(R) No.89 of 2001 forthe assessment year 1988-89, following the earlier decision of this Courton a reference made with regard to the similar issue in COMMISSIONER OFINCOME-TAX v. OOTY DASAPRAKASH [(1999) 237 I.T.R. 902], referred supra,the issue is answered in favour of the assessee. Following the same, thesecond issue is answered in the affirmative, in favour of the assessee andagainst the Revenue. 9.5. With respect to the third issue also, in T.C.(R) No.89 of 2001for the assessment year 1988-89, the reference is answered in favour ofthe assessee and against the Revenue, agreeing with the views taken by theDelhi High Court in COMMISSIONER OF INCOME-TAX v. PUNJAB AND SIND BANK,(2000) 244 I.T.R. 393, referred supra. Hence, the reference with regardto the third issue is also answered in the affirmative, in favour of theassessee and against the Revenue. https://hcservices.ecourts.gov.in/hcservices/ 9.6. With respect to the last issue, viz., whether the expenditureincurred on false ceiling, partition, etc. in the assessee's lease holdpremises were revenue in nature, the same issue was referred earlier tothis Court in COMMISSIONER OF INCOME-TAX v. DASAPRAKASH [(1978) 114 I.T.R.210], wherein the issue was answered in favour of the assessee, holdingthat the expenses on decorated mirrors, plaster-moulded roof, plywoodpanels, etc. were incurred with a view to beautify the premises and tokeep the place fit and hence, they cannot be said to be of an enduringnature as the items for which they were used be of no use with referenceto any other place and they cannot also be removed and used and they arejust fixed in the walls so that they would present an inviting appearanceto the customers assembled there and hence, the expenses were allowable asa deduction under section 37 of the Act. 9.7. In view of the above settled proposition, the last issue is alsoanswered in the affirmative, in favour of the assessee and against theRevenue. T.C.(R) No.91 of 2001 (R.A.No.257/Mds/97) with reference to the assessmentyear 1991-92: 10.1. In respect of T.C.(R) No.91 of 2001 with reference to theassessment year 1991-92, the Tribunal has referred the following questionsof law for our consideration:“1. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the amountscollected by the assessee from lessees towards sales taxrepresented only contingent deposits and therefore questioningthe directions of the Commissioner of Income-tax under sec.263on this issue ? 2. Whether on the facts and in the circumstances of the case theTribunal was right in law in holding that the assessee isentitled as revenue deduction under sec.37 (1) the expenditureincurred by it in partitions, false ceilings, etc. in theassessee's own premises used for housing lockers ? 3. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the assessee isentitled to depreciation at the rate applicable to a plant at 331/3rd on its buildings housing the safe deposit lockers ?" 10.2. For the assessment year 1991-92, the assessing officer added theamounts collected by way of contingent deposit from the lessees towardssales-tax on lease rentals to the income of the assessee, pursuant to theorder of the Commissioner under Section 263 of the Act, by invokingsection 43B of the Act, as the same had not been paid to the Government.The assessing officer also disallowed the claim of the assessee withregard to the deduction under Section 37(1) of the Act for the expenditurehttps://hcservices.ecourts.gov.in/hcservices/ 3. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the assessee isentitled to depreciation at the rate applicable to a plant at 331/3rd on its buildings housing the safe deposit lockers ?" 10.2. For the assessment year 1991-92, the assessing officer added theamounts collected by way of contingent deposit from the lessees towardssales-tax on lease rentals to the income of the assessee, pursuant to theorder of the Commissioner under Section 263 of the Act, by invokingsection 43B of the Act, as the same had not been paid to the Government.The assessing officer also disallowed the claim of the assessee withregard to the deduction under Section 37(1) of the Act for the expenditurehttps://hcservices.ecourts.gov.in/hcservices/ incurred in partitions, false ceilings, in the assessee's own premises andalso with regard to the rate of depreciation adopted by the assessee onits buildings housing the safe deposit lockers by treating it as plant.The Commissioner, upheld the disallowance under section 43B and alsoupheld the order of the assessing officer on the other two issues. Onappeal, the Tribunal, following its earlier decision, held the issues infavour of the assessee. Hence, the present reference. 10.3. The issue referred in the first question is already answered inT.C.(R) No.87 and 93 of 2001 in favour of the Revenue. Hence, thereference with regard to the first issue is answered in the negative, infavour of the Revenue and against the assessee. 10.4. With regard to the second issue also, in T.C.(R) No.89 of 2001for the assessment year 1988-89, following the earlier decision of thisCourt on a reference made with regard to the similar issue in COMMISSIONEROF INCOME-TAX v. OOTY DASAPRAKASH [(1999) 237 I.T.R. 902], referred supra,the issue is answered in favour of the assessee. Following the same, thereference with regard to the second issue is answered in the affirmative,in favour of the assessee and against the Revenue. 10.5. The third issue referred to above is also answered in T.C.(R)No.89 of 2001 for the assessment year 1988-89, in favour of the assesseeagreeing with the views taken by the Delhi High Court in COMMISSIONER OFINCOME-TAX v. PUNJAB AND SIND BANK, (2000) 244 I.T.R. 393, referredsupra. Hence, the reference with regard to the third issue is answered inthe affirmative, in favour of the assessee and against the Revenue. T.C.(R) Nos.92 and 94 of 2001 (R.A.Nos.258 and 260/Mds/97) with referenceto the assessment years 1992-93 and 1989-90: 11.1. In respect of T.C.(R) Nos.92 and 94 of 2001 with reference tothe assessment years 1992-93 and 1989-90, the Tribunal has referred thefollowing questions of law for our consideration: “1. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the amountscollected by the assessee from lessees towards sales taxrepresented only contingent deposits ? 2. Whether on the facts and in the circumstances of the case,the Tribunal was right in law in holding that the assessee isentitled to depreciation at the rate applicable to a plant at 331/3rd on its bu