F G P LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX
INCOME TAX APPELLATE TRIBUNAL
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K.C. Singhal, Judicial Member -
(1.) THESE are eight appeals, four by the assessee and four by the department, pertaining to assessment years 1978-79, 1979-80, 1981-82, 1983-84 and 1984-85. Three appeals of the assessee are against the order of the Commissioner of Income-tax under Section 263 and one against the order of the CIT(A). On the other hand, the revenue's appeals are against the order of the CIT(A).
(2.) The assessee is a limited company engaged in the manufacture of glass fibres and yarn. On verification of the record the Commissioner of Income-tax took the view that the order of the Assessing Officer pertaining -to assessment years 1978-79, 1979-80, 1981-82, 1983-84 and 1984-85 were erroneous and prejudicial to the interest of the revenue on the following grounds:
(i) That the glass fibres and its yarn manufactured by the assessee were hit by the item 17 of Schedule Eleventh of the IT Act, i.e., "glass and glassware", the Assessing Officer was not justified in allowing investment allowance in the assessment years 1978-79, 1979-80 and 1981-82 in respect of machineries engaged in the manufacture of these items.
(ii) That the Assessing Officer has wrongly considered the value of work-in-progress while computing the working of "the capital employed" for the purpose of Section 80J in respect of assessment year 1979-80.
(iii) That the Assessing Officer also wrongly allowed 100% depreciation on the furnace used in melting of glass in respect of assessment year 1983-84, as in the past he had been treating the assessee as not a company manufacturing glass or glassware.
(iv) That the Assessing Officer also wrongly allowed investment allowance in respect of fire extinguishers, electrical works of cable, fire hydrant extensions and piping work pertaining to assessment year 1984-85, since these items had no closer nexus with the production process.
(v) That for assessment year 1984-85 the Assessing Officer failed to consider the salary paid to car drivers while working out disallowance under Section 37(3A). The Commissioner of Income-tax Bombay therefore, set aside the order of the Assessing Officer pertaining to the aforesaid assessment years and directed the Assessing Officer to pass fresh assessments in accordance with law. In consequent of these directions, the Assessing Officer made fresh assessments for all these years and withdrew the claim of the assessee relating to investment allowance and also recomputed the relief under Section 80J as well as disallowance under Section 37(3A).
The assessee filed appeals before the Tribunal against the orders of the Commissioner of Income-tax under Section 263 for all the assessment years. It is however pointed out that appeals against the order of the Commissioner of Income-tax under Section 263 relating to assessment years 1978-79 and 1981-82 have already been disposed of by the Tribunal in favour of the assessee on 10-2-1992. So appeals against orders of the Commissioner of Income-tax under Section 263 survive before us for assessment years 1979-80, 1983-84 and 1984-85 for disposal. The assessee also filed appeals before the CIT(A) against the fresh assessment orders passed by the Assessing Officer. The appeals by the assessee for assessment years 1978-79,1979-80 and 1981-82 had been allowed by the CIT(A), while appeals for assessment years 1983-84 and 1984-85 have been partly allowed. Hence the revenue has filed appeals before the Tribunal against the orders of the CIT(A) for assessment years 1978-79, 1979-80, 1981-82 and 1984-85. The assessee also filed appeal against the order of the CIT(A) pertaining to assessment year 1983-84.
(3.) FIRST we take up the assessee's appeal for the assessment year 1979-80 bearing ITA No. 3995/Bom./88.
(ii) Ground Nos. 1 and 3 have not been pressed before us and therefore, the same are dismissed as not pressed.
(iii) Ground No. 2 relates to investment allowance in respect of machineries used in manufacture of glass fibre and its yarn. The learned counsel for the assessee has strongly argued that items in taxing statute have to be construed in the sense in which it is identified by the people who use the items mentioned in the entry. According to him, it is the functional test by which the product is identified. Glass fibre that is commonly used as insulation material in various products such as refrigerators and air-conditioners. It is also used for manufacturing helmets, car wind screen, etc. On the other hand, glass is a brittle, hard and transparent article. Glasswares are those articles of glass which are normally used by the common people in daily use such as crockery, sheet glass for doors and windows, etc., which are manufactured by hard and transparent substance. In support of his contention he relied on the decision of the Hon'ble Supreme Court in the case of Atul Glass Industries (P.) Ltd. v. Collector of Central Excise  3 SCC 480. He also invited our attention to the meanings of the fibre glass as well as glass and glassware given in various dictionaries. He also referred to encyclopedia Britanica. He then referred to the entries given in the FIRST Schedule to the Central Excise Act which describe different rates of excise duty. The items glass fibre and its yarn have been classified under entry 22F(1) attracting excise duty at the rate of 15% while the "glass and glassware" are classified under entry 25A attaching excise duty at the rate of 35%. It is further stated that items manufactured by the assessee have been classified by the Excise authorities under item 22F(1). The glass fibre and yarn were also shown and produced before us for identification. In view of this fact and case law, the counsel for the assessee finally submitted that the fibre glass and its yarn could not be treated as glass or glassware as mentioned in entry No. 17 of Schedule Eleventh of IT Act and therefore, it was pleaded that Commissioner of Income-tax was not justified in directing the Assessing Officer to withdraw the claim of the assessee for investment allowance.
(iv) Ground No. 4 relates to computation of "the capital employed" for the purpose of Section 80J. It was argued by the counsel for the assessee that Commissioner of Income-tax was not justified in directing the Assessing Officer to exclude the work-in-progress while computing the capital employed, since the issue is decided in favour of the assessee by the jurisdictional High Court in the case of CIT v. Alcock Ashdown & Co. Ltd.  119 ITR 164 (Bom.).;
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