BERGER PAINTS INDIA LTD. vs. COMMISSIONER OF INCOME TAX, CALCUTTA

CIVIL APPEAL No. 1081/2004Supreme Court[2004] 2 S.C.R. 50217 February 2004Bench: 2 JudgesAuthor: K.G. BALAKRISHNAN, B.N. SRIKRISHNA BERGER PAINTS INDIA LTD.9 pages
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What did the Supreme Court hold?

The Supreme Court allowed the appeals, setting aside the Calcutta High Court's judgments. The Court held that if the Revenue has not challenged the correctness of a law laid down by a High Court and has accepted it in the case of one assessee, it is not open to the Revenue to challenge its correctness in the case of other assessees without just cause. The Court found no just cause to depart from the established principle. The Court rejected the Revenue's attempt to distinguish the Gujarat High Court's judgment in Lakhanpal National Ltd. on the ground that it was rendered in connection with a provisional assessment, stating the judgment was based on an analysis of Section 43B. The Court noted that the Lakhanpal National Ltd. decision was followed by the Madras and Bombay High Courts and a Special Bench of the Tribunal, none of which were challenged. Therefore, the Revenue, the Tribunal, and the Calcutta High Court erred in permitting the Revenue to raise a contention contrary to the law laid down in Lakhanpal National Ltd. The questions referred for all three assessment years were answered in favour of the assessee. The Court also noted that a certificate to appeal ought to have been granted by the Calcutta High Court.

What were the facts?

The assessee, Berger Paints India Ltd., claimed deductions for customs and excise duties paid during the previous year under Section 43B of the Income Tax Act, 1961, for assessment years 1984-85, 1986-87, and 1987-88. For 1984-85, the Inspecting Assistant Commissioner allowed the claim. However, the Commissioner of Income Tax initiated proceedings under Section 263, disallowing the deduction, viewing the Gujarat High Court's decision in Lakhanpal National Ltd. as distinguishable. The Tribunal confirmed the Commissioner's order. For 1986-87 and 1987-88, the Tribunal allowed the assessee's claim regarding duty included in closing stock. The Revenue challenged this in references to the High Court, which ruled in favour of the Revenue. The assessee appealed to the Supreme Court against the High Court's decisions.

What were the issues?

1. Whether the Tribunal was right in law in rejecting the assessee's claim for deduction under Section 43B for assessment year 1984-85, considering the Gujarat High Court's decision in Lakhanpal National Ltd. v. ITO. - Assessee's contention: Relied on the Gujarat High Court's decision in Lakhanpal National Ltd. and argued that the Revenue, having accepted this law in other cases, could not challenge it without just cause. Argued the Gujarat High Court's judgment was not distinguishable as being related to a provisional assessment. - Revenue's contention: Argued the Gujarat High Court's decision was distinguishable as it pertained to a provisional assessment under Section 141A and not a regular assessment. 2. Whether the Tribunal was justified in allowing the deduction claimed under Section 43B for assessment years 1986-87 and 1987-88, where customs and excise duty was included in the value of the closing stock. - Assessee's contention: (Implied from the Tribunal's decision and the subsequent appeal) The deduction should be allowed as per the principle established in Lakhanpal National Ltd. and followed by other High Courts and the Tribunal's Special Bench. - Revenue's contention: (Implied from the High Court's decision and the subsequent appeal) The deduction was not permissible as claimed.

Which sections of the Income-tax Act were involved?

Section 43B,Section 263,Section 141A,Section 261

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- A BERGER PAINTS INDIA LTD. v. COMMISSIONER OF INCOME TAX, CALCUTT A FEBRUARY 17, 2004 B [K.G. BALAKRISHNAN AND B.N. SRIKRISHNA, JJ.] Income Tax Act, 1961: Section 43 B-Deduction allowed to assessee-Interpretation of- ..:w· c I Pr[nciple laid down by Gujarat High Court in Lakhanpal National Ltd's case followed in judgments of Madras High Court and Bombay High Court and in the decision of Special Bench of the Income Tax Appellate Tribunal, none of which was challenged-Held, if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in D case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause-It cannot be said that judgment of Gujarat High Court was distinguishable as being one rendered in connection with a provisional assessment under Section 141-A and not in a regular assessment. E Section 261-Certificate to appeal-High Court departing from the uniform view taken by other High Courts-Held, in view of this, a certificate -~- to appeal ought to have been granted-Practice and Procedure. .....

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