Case: Britannia Industries Ltd Vs. Commnr. Of Income Tax

of Section 37(4) of the Act. 21. Dr. Pal submitted that apart from the said two decisions of the Calcutta High Court, the uniform decision of most of the High Courts appears to be that since the expenditure incurred for rents, rates, taxes, repairs and insurance of buildings and premises and furniture used for the purposes of business or profession, have been specifically provided for in Sections 30, 31 and 32 of the Act, benefits thereof could not be denied to the assessee under the relevant provisions of Section 37 of the Act.22. Dr. Pal urged that the judgment under appeal did not give any independent reasoning but was rendered following the decision of the Calcutta High Court in Century Spinning and Manufacturing Co. Ltd. and Upper Ganges Sugar Mills Ltd. (supra) and could not therefore be sustained.23. Appearing for the Revenue, Mr. Rajeev Dutta, learned Senior Counsel, however, contended that the provisions of Section 37 would have to be read in isolation from the provisions of Sections 30 to 36 of the Act as contemplated by the non obstante Clause in Sub-section (1) of Section 37. Mr. Dutta urged that the provisions of Section 37 had been correctly interpreted in the two decisions of the Calcutta High Court in Century Spinning and Manufacturing Co. Ltd.and Upper Ganges Sugar Mills Ltd. (supra).24. Mr. Dutta urged that it was the clear intention of the Legislature to exclude the benefit of deduction in respect of guest houses which were being run and maintained by companies in a lavish manner. Mr. Dutta submitted that while premises and buildings had been referred to in general terms in Sections 30, 31 and 32 of the Act, guest houses had been separately categorized for the purposes of Section 37 which would be quite evident from the manner in which expenses, including rent and maintenance, were sought to be withdrawn in respect of such guest houses. Mr. Dutta submitted that the intention of the Legislature would be further clear from the insertion of Sub-section (5) which brought within the scope and ambit of Section 37(4) all accommodation by whatever name called in the nature of a guest house. 25. In support of his submissions, Mr. Dutta referred to the decision of Rajasthan High Court in Commissioner of Income Tax v. Instrumentation Ltd., reported in (2002) 258 ITR 513 , where upon considering the views expressed by the Bombay High Court and the Gujarat High Court in the cases of Chase Bright Steel Ltd. andAhmedabad Mfg. and Calico Printing Co. Ltd. (supra), it was urged that expenditure incurred towards rent and maintenance of guest houses after 28th February, 1970, was not deductible in view of Section 37(4) of the Act. 26. Reference has also been made to a decision of the Madras High Court in Commissioner of Income Tax v. Mathurantakam Co-operative Sugar Mills Ltd., reported in (2000) 241 ITR 817; wherein certain expenses, which came within the mischief of Section 37(4) of the Act were disallowed. 27. Other similar decisions of the Madras and the Rajasthan High Courts were also referred to. 28. Mr. Dutta lastly referred to another decision of the Calcutta High Court in the case of Commissioner of Income Tax v. Biswanath Tea Co. Ltd., (2003) 264 ITR 166 to which one of us (Hon’ble Altamas Kabir, J.) was a party. In the said case the Calcutta High Court had occasion to consider the various decisions which have also been cited by Dr. Pal in the instant case and upon a consideration of the language of Section 37(4), it was held that having regard to the unambiguous bar incorporated under Sub-section (4) of Section 37, the benefits indicated in Sections 30 to 36 although, independent of Section 37, could not be related to the guest house maintained by the assessee. It was held that apart from the view taken in Upper Ganges Sugar Mills Ltd. and Kesoram Industries and Cotton Mills Ltd., any other interpretation would negate the object of the prohibition engrafted in Sub-section (4). 29. The only question which we are called upon to consider in the instant case is whether the expression ‘premises and buildings’ referred to in Sections 30 and 32 and used for the purposes of the business or profession would include within its scope and ambit the expression ‘residential accommodation including any accommodation in the nature of guest house’ used in Sub-sections (3), (4) and (5) of Section 37 of the Act. While the two expressions can be similarly interpreted, a distinction has been sought to be introduced for the purposes of Section 37 by specifying the nature of building to be a guest house. In our view, the intention of the Legislature appears to be clear and unambiguous and was intended to exclude the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purposes of a guest house of the nature indicated in Sub-Section (4) of Section 37. When the language of a statue is clear and unambiguous, the Courts are to interpret the same in its literal sense and not to give it a meaning which would cause violence to the provisions of the statute. If the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodations used for the purposes of business or profession, then it would not have felt the need to amend the provisions of Section 37 so as to make a definite distinction with regard to buildings used as guest houses as defined in Sub-section (5) of Section 37 and the provisions of Sections 31 and 32 would have been sufficient for the said purpose. The decisions cited by Dr. Pal contemplate situations where specific provision had been made in Sections 30 to 36 of the Act and it was felt that what had been specifically provided therein could not be excluded under Section 37. The clarification introduced by way of Sub-section (5) to Section 37 was also not considered in the said case.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]4. Sections 31 and 32 deal with the amounts which are allowable in respect of repairs and insurance of machinery, plant and furniture used for the purposes of the business or profession and in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets along with other intangible assets.Sections 31 and 32 deal with the amounts which are allowable in respect of repairs and insurance of machinery, plant and furniture used for the purposes of the business or profession and in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets along with other intangible assets.As will be apparent from a reading of Sub-section (1) of Section 37 of the Act, any expenditure not being expenditure of the nature described in Sections 30 to 36, inter alia, allowed and expended wholly and exclusively for the purposes of business or profession, is to be allowed in computing the income chargeable under the headingand gains of business orIn other words, Section 37 is to be read to the exclusion of the amounts allowable under Sections 30 to 36.9. Although, the expressionused for the purposes of the business orhas been used along with the expressionunder Sections 30, 31 and 32 of the Act, for the first time the expressionaccommoda-tion including any accommodation in the nature of a guesthas been used in Sub-section (3) of Section 37 of the Act. As will be seen, Sub-section (3) of Section 37 indicates that notwithstanding anything contained in Sub-section (1) any expenditure incurred by an assessee after 31st of March, 1964, inter alia, on maintenance of any residential accommodation in the nature of a guest house and hotel expenses, would be allowed only to the extent and subject to such conditions, if any, as may be prescribed.10. Sub-section (4), which was inserted in the statute book with effect from 1st April, 1970, is specific and provides that notwithstanding anything contained in Sub-section (1) and Sub-section (3) no allowance shall be made in respect of any expenditure incurred by the assessee after 28th February, 1970, on the maintenance of any residential accommodation in the nature of guest house and no allowance shall be made in respect of depreciation of any building used as a guest house or depreciation of any assets in the guest house. However, a guest house maintained as holiday home in the circumstances indicated have been excluded from the purview of Sub-section (4) referred to hereinabove.11. Inasmuch as, doubts still remained regarding the nature of accommodation used as a guest house by the companies, Sub-section (5) was included in Section 37 by the Finance Act in 1983 with effect from 1st April, 1979 and was subsequently omitted by the Finance Act, 1997 with effect from 1st April, 1998. At the relevant point of time, namely, the assessment year 1994-1995, all the aforesaid provisions of Section 37 were available and, therefore, applicable to the case of the appellant-company.e only question which we are called upon to consider in the instant case is whether the expression ‘premises andreferred to in Sections 30 and 32 andused for the purposes of the business orprofession would include within its scope and ambit the expression ‘residential accommodation including any accommodation in the nature of guestused in Sub-sections (3), (4) and (5) of Section 37 of the Act.