ITR No. 22 of 1997

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITR No. 22 of 1997

Date of Decision: 23.9.2010

Commissioner of Income-tax, Patiala

....Petitioner.

Versus

M/s Mount Shivalik Breweries Ltd.

...Respondent.

CORAM:-

HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.

HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.

PRESENT: Mr. Tajender K. Joshi, Advocate for the revenue.

Mr. S.K. Mukhi, Advocate for the assessee.

AJAY KUMAR MITTAL, J.

1.

This order shall dispose of ITR Nos. 22 and 128 of 1997

and ITA No. 86 of 2000 as common questions of law and facts are

involved therein. Being identical matters, the facts are being extracted

from ITR No. 22 of 1997.

2.

On the directions of this Court vide orders dated 15.5.1996

in ITC Nos. 61 to 63 of 1995, the Income Tax Appellate Tribunal,

Chandigarh Bench (in short “the Tribunal”) has referred the following

question of law arising out of its order dated 29.3.1994 in ITA Nos. 463

to 465/Chandi/88, for the assessment years 1983-84 to 1985-86 for its

opinion:-

“Whether on the facts and in the circumstances of

the case, the Tribunal was right in law in holding that

the assessee was eligible for investment allowance

ITR No. 22 of 1997

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under section 32A and to the deduction under section

80-I of the Act in regard to its new industrial unit set

up at Chandigarh?”

3.

Facts as narrated in the statement of case may be noticed

relating to assessment year 1983-84. The assessee filed its return for

assessment year 1983-84 on 29.9.1983 declaring net income of

Rs.49,61,320/-. The said return was filed late by two months. The

assessee is manufacturing country liquor and beer. The Assessing

Officer passed assessment order on 30.8.1985 allowing investment

allowance at Rs.2,11,867/-. The claim of the assessee for deduction

under Section 80-I was disallowed. The assessee filed an application

before the Assessing Officer under Section 154 and made three claims,

i.e. with regard to the disallowance of interest under Section 40A(5);

disallowance on account of rest-house expenses; and deduction under

Section 80-I of the Act. The Assessing Officer vide order dated

10.12.1985 allowed the said application and deleted the disallowance

on account of rest-house expenses to the tune of Rs.67,250/- besides

allowing deduction of Rs.27,824/- under Section 80-I of the Act.

Accordingly, the revised income was computed at Rs.50,32,830/-.

4.

The Commissioner of Income Tax [in short “the CIT”] in

exercise of power under Section 263 of the Act issued a notice dated

30.12.1986 seeking to withdraw investment allowance of Rs.2,11,067/-

and deduction under Section 80-I amounting to Rs.27,824/- which was

allowed in the assessment order. The CIT held that the undertaking of

the assessee was not engaged in the manufacturing process and,

therefore, assessee was not entitled to investment allowance under

ITR No. 22 of 1997

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Section 32A and deduction under Section 80-I of the Act.

5.

On appeal by the assessee, the Tribunal set aside the

order of the CIT and upheld that of the Assessing Officer. Hence, the

reference at the instance of the revenue.

6.

We have heard learned counsel for the parties and have

perused the record.

7.

Learned counsel for the revenue submitted that the

Tribunal had erred in allowing the claim of the assessee for investment

allowance under Section 32A and deduction under Section 80-I of the

Act by holding it to be a new industrial unit within the meaning of the

aforesaid provision. According to the learned counsel, there was no

manufacturing or production in the spirit bottling plant and India made

foreign liquor and, therefore, no allowance/deduction under Section 32A

and 80-I could be allowed to the assessee. It was further submitted that

the item fell under Schedule XI of the Act and on that account also the

aforesaid deductions were not admissible to the assessee.

8.

Controverting the aforesaid submissions, learned counsel

for the as