SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner, Saurashtra Cement and Chemical Industries Ltd., Ranavam, District Porbandar, has filed this special civil application for the issuance of a writ in the nature of mandamus or certiorari or any other writ, direction or order under Art. 226 of the Constitution of India to quash the order of the respondent, the CIT, Gujarat Circle, Ahmedabad, dated September 4, 1986, and to condone the delay and to direct the respondents to dispose of the concerned revision petition on merits and also to direct him to dispose of the revision petition for the asst. year 1965 66 pending with him since December 26, 1972. The facts leading to the filing of the present special civil application may shortly be stated as under:

(2.) THE petitioner entered into an agreement with the Gujarat Electricity Board on September 23, 1959, for additional supply of electricity for working a plant on condition that the petitioner contributed towards the cost of laying a service line to its factory. In accordance with the said agreement, in the accounting year ending June 30, 1964, the petitioner contributed Rs. 3,00,600 towards the cost of laying of a service line to the factory. The petitioner capitalised the said amount and in the asst. year 1965 66 claimed depreciation thereof which was allowed by the concerned ITO by his order dated July 21, 1969, For the next assessment year, i.e., 1966 67, the petitioner once again claimed depreciation on the written down value of the said amount being Rs. 2,70,540. The concerned ITO, however, took the view that as the petitioner did not become the owner of the said service line under the terms of the agreement, the petitioner was not entitled to claim depreciation. The petitioner preferred an appeal to the AAC who rejected the petitioner's appeal by his order dated December 21, 1970. The petitioner thereupon preferred further appeal to the Tribunal. At the hearing of the appeal before the Tribunal, the petitioner through its counsel, felt that in view of the terms of the agreement and in view of the approach of the Department on the question of depreciation, the petitioner had a better chance of claiming the said amount by way of revenue expenditure instead of claiming depreciation though the same was allowed by the ITO for the asst. year 1965 66. The petitioner, therefore, sought permission of the Tribunal to withdraw the appeal pending before it to enable the petitioner to file a revision petition to the CIT under S. 264 of the Act for the asst. year 1965 66 for claiming the said amount by way of revenue expenditure. The Tribunal permitted the petitioner to withdraw the appeal by its order dated November 23, 1972, which order was received by the petitioner on December 7, 1972. On December 26, 1972, the petitioner preferred a revision petition under S. 264 to the CIT and claimed that the said amount of Rs. 3,00,600 be allowed as revenue expenditure in the asst. year 1965 66, the year in which the then ITO had allowed depreciation on the said amount, treating the same as capital expenditure. The petitioner also applied for condonation of delay in filing the said revision application, in view of the circumstance of the case which showed sufficient cause for not filing the revision petition earlier.

(3.) WHILE the revision application for the asst. year 1965 66 was thus pending before the respondents, a similar situation developed with regard to the asst. year 1969 70 for a Similar claim of depreciation in respect of a sum of Rs. 6,00,000 as the petitioner's further contribution to the Gujarat Electricity Board for laying of a service line to the petitioner's factory. The petitioner claimed depreciation in respect of the aforesaid amount in the asst. year 1969 70 as the entry for the said amount was made on the last day of the accounting year relevant to the asst. year 1968 69. The ITO rejected the claim of the petitioner for depreciation by his order dated March 20, 1972, on the ground that the petitioner was not the owner of the said service line and, therefore, it was not entitled to depreciation. The petitioner preferred an appeal to the AAC in this regard. The said appeal was dismissed on September 30, 1972, and the appellate order was received by the petitioner on October 30, 1972. As the petitioner felt that it has a better chance about the allowability of the amount as revenue expenditure, the petitioner preferred a revision petition to the respondent on October 24, 1973, claiming the amount of Rs. 6,00,000 as revenue expenditure. The said revision petition was dismissed by the respondent by his order dated March 29, 1975, on a technical ground of limitation as, according to him, there was a delay of 11 days. The petitioner preferred Special Civil Application No. 1061 of 1975, which came up before the Division Bench of this Court on February 16, 1978, and was heard along with the other writ petition for the asst. yr. 1965 66. In regard to this writ petition, the respondent's standing counsel contended that as the said amount was debited on the last day of the accounting year ending on June 30, 1967, if the said amount was revenue expenditure at all, it would pertain to the accounting year June 30, 1967, corresponding to the asst. year 1968 69 and not for the asst. year 1969 70. The petitioner's advocate, therefore, withdrew the said special civil application to enable the petitioner to adopt proper proceedings regarding this amount of Rs. 6,00,000 being treated as revenue expendi ture in respect of the asst. year 1968 69. The permission to withdraw the said special civil application was granted and the petitioner there after immediately filed a revision petition to the respondent on February 21, 1978, under S. 264 of the IT Act, for the asst. year 1968 69 claiming that the said amount of Rs. 6,00,000 be allowed as revenue expenditure and that the delay in filing the said petition be condoned in view of the previous litigation in the High Court and before the CIT on the very same issue. The said revision petition dated February 21, 1978, was submitted to the respondent.