C I T vs. M/S HIGHWAYS INDS. LTD.

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ITA/529/2008HC Punjab & HaryanaPHHC01080530200802 May 20162 pages
AI SummaryWithdrawn

What did the High Court hold?

The Revenue's counsel, citing CBDT Circular No. 21/2015 and Circular No. 279/Misc/M-142/2007-ITJ (Part), stated that they did not wish to press the appeal as the tax effect was less than ₹20 lacs. They sought liberty to revive the appeal if any surviving aspect warranted it. The Court dismissed the appeal as not pressed, granting the liberty as prayed. It was clarified that the withdrawal would not be taken as an affirmation of the Tribunal's order on merits, and the legal issues were left open for adjudication in an appropriate case. Therefore, no specific findings were given by the High Court on the substantial questions of law raised.

What were the facts?

The Revenue, Commissioner of Income Tax, Ludhiana-II, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated July 17, 2007, passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench (A). The appeal pertains to the assessment year 2001-02 and concerns the assessee, M/s Highway Industries Ltd., Ludhiana. The ITAT's order addressed several issues, including interest on interest-free loans to a sister concern, foreign travel expenses of directors' wives, computation of deduction under Section 80HHC, and classification of software expenditure. The appeal was listed for hearing before the High Court of Punjab and Haryana.

What were the issues?

The Tribunal had to decide four substantial questions of law: 1. Whether the ITAT was justified in restoring the issue of interest paid on an interest-free loan advanced to a sister concern (M/s Gujarat Cycle Inds. Ltd.) to the Assessing Officer (AO), despite the jurisdictional High Court's decision in M/s Abhishek Inds. Ltd. favouring the revenue? 2. Whether the ITAT was justified in deleting an addition of ₹2,50,057/- representing expenditure on foreign travel of directors' wives, deeming it for non-business purposes? 3. Whether the ITAT was justified in directing the AO to exclude turnover discount, interest income, machinery capitalization, carriage outwards, and miscellaneous income while computing deduction under Section 80HHC? 4. Whether the ITAT was justified in treating expenditure incurred on a software program as revenue expenditure instead of capital expenditure? The Revenue argued that the ITAT's decision on the first issue was contrary to the jurisdictional High Court's precedent. The judgment does not record specific arguments from either side on issues 2, 3, and 4, nor does it detail the ITAT's reasoning on these points.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80HHC

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 02.05.2016 Commissioner of Income Tax, Ludhiana-II .......Appellant Versus M/s Highway Industries Ltd., Ludhiana ......Respondent CORAM: HON'BLE MR. JUSTICE RAJESH BINDAL HON'BLE MR. JUSTICE HARINDER SINGH SIDHU Present: Mr. Zora Singh Klar, Advocate for the appellant. Mr. Alok Mittal, Advocate for the respondent. RAJESH BINDAL,J. This appeal has been filed under Section 260 A of the Income Tax Act, 1961 (for short 'the Act'), against the order dated 17.07.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench (A), in ITA No. 731/Chandi/2006, for the assessment year 2001-02, raising the following substantial questions of law: (i) Whether on the facts and in law the ITAT was justified in restoring back the issue of interest paid on interest free loan advanced to sister concern i.e. M/s Gujrat Cycle Inds. Ltd., to the file of the Assessing Officer despite that the issue is covered in favour of revenue by the decision of juri ictional High Court in the case of M/s Abhishek Inds. Ltd.,? (ii) Whether on the facts and in the circumstance of the case the ITAT was justified in law in deleting the addition of ` 2,50,057/- being expenditure incurred REEMA SAINI 2016.05.03 11:16 I attest to the accuracy and authenticity of this document High Court, Chandigarh -2- on the foreign travels of the director's wives for non business purpose? (iii) Whether on the facts and in law the ITAT was justified in directing the AO to exclude turnover discount, interest income, machinery capitalization, carriage outwards and Misc. income while computing deduction under section 80HHC? (iv) Whether on the facts and in law the ITAT was justified in treating the expenditure incurred as Software Programme as revenue expenditure instead of capital expenditure? Learned counsel for the appellant-revenue submitted that in view of circular No.21/2015 dated 10.12.2015 read with circular No.279/Misc/M-142/2007-ITJ (Part) dated 8.3.2016, issued by Central Board of Direct Taxes, he does not wish to press the present appeal, as the tax effect involved is less than ` 20 lacs. However, he prays that liberty be granted to the revenue to file an application for revival of the appeal in case something survives therein. Dismissed as not pressed with liberty as prayed for. It is however, clarified that withdrawal of the appeal by the revenue shall not be taken as affirmation of order of the Tribunal on merits. The legal issue as claimed by the revenue is left open to be adjudicated in an appropriate case. (RAJESH BINDAL)

JUDGE (HARINDER SINGH SIDHU) 02.05.2016 JUDGE reema REEMA SAINI 2016.05.03 11:16 I attest to the accuracy and authenticity of this document High Court, Chandigarh

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