C I T, LUDHIANA vs. PUNJAB CONCAST STEELS LTD, LUDHIANA
What did the High Court hold?
Regarding the first question concerning the applicability of Section 80-I(6) and 80-I(8), the High Court held that the Tribunal was not justified in making a reference relating to the reallocation of income under Section 80-I(6). This was based on the fact that the Revenue had already accepted the correctness of the ITAT's order for assessment year 1988-89, which had decided against reallocation of income under Section 80-I(6). Furthermore, the Revenue did not specifically seek a reference invoking Section 80-I(6) in the appeal for assessment year 1989-90. The Tribunal's earlier order (para 32 & 33) had clarified that Section 80-I(6) was enacted to ascertain profits as if the industrial undertaking were an independent unit and did not grant revenue authorities the power to reallocate expenses, especially when the assessee maintained regular books of account and production records. For the second question, the High Court stated that it had already been answered/decided by the same Bench in ITR No.124 of 1997 on 29.10.2013, in the case of Commissioner of Income Tax (Central) Ludhiana Versus M/s Nahar International Limited, Ludhiana, and was therefore answered accordingly. The operative direction was that the reference is disposed of.
What were the facts?
This case involves a reference made by the Income Tax Appellate Tribunal (ITAT) to the High Court of Punjab and Haryana concerning assessment year 1989-90. The Commissioner of Income Tax (Central), Ludhiana (the Revenue) is the appellant, and Punjab Concast Steels Ltd., Ludhiana (the Assessee) is the respondent. The ITAT's order, which is under challenge, dealt with two main issues: the applicability of Section 80-I(6) and Section 80-I(8) of the Income Tax Act, 1961, and the disallowance of boarding and lodging expenses. The ITAT had previously decided a similar matter for assessment year 1988-89, which the Revenue had accepted. The Revenue also did not seek a reference specifically invoking Section 80-I(6) in the appeal for assessment year 1989-90.
What were the issues?
The High Court was asked to decide two questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that neither the provisions of sub-section (6) nor sub-section (8) of Section 80I of the Income-tax Act was applicable to the assessee's case? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance of Rs.21,055/- made on account of boarding and lodging expenses on engineers u/s 37(2A) read with Explanation 2 thereunder? Arguments presented: For Question 1: Assessee: Not explicitly recorded, but the ITAT's prior order on Section 80-I(6) and 80-I(8) was accepted by the Revenue for AY 1988-89, and the Revenue did not seek a reference specifically invoking Section 80-I(6) for AY 1989-90. Revenue: The Revenue sought a reference on the applicability of Section 80-I(6) and 80-I(8). The ITAT's reasoning in its order dated 19.03.1993, which interpreted Section 80-I(6) as not empowering revenue authorities to reallocate expenses, was relied upon by the Tribunal. For Question 2: Assessee: Not explicitly recorded. Revenue: The Revenue made a disallowance of Rs.21,055/- on account of boarding and lodging expenses under Section 37(2A) read with Explanation 2.
Which sections of the Income-tax Act were involved?
Section 80-I(6), Section 80-I(8), Section 37(2A)
AI-generated summary — verify with the full judgment below
[ 1 ] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Decided on: 30.10.2013
Commissioner of Income Tax, (Central), Ludhiana ..... Appellant
VERSUS Punjab Concast Steels Ltd., Ludhiana ..... Respondent
CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA
HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present: Mr.Rajesh Katoch, Advocate, for the appellant. Mr.Sanjay Bansal, Senior Advocate, with Ms.Kriteka, Advocate, for the respondent.
******* RAJIVE BHALLA, J. (ORAL) The Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, (hereinafter referred to as the 'Tribunal') has made a reference on the following questions of law: - “1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that neither the provisions of sub-section (6) nor sub-section (8) of Section 80I of the Income-tax Act was applicable to the assessee's case?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance of Rs.21,055/- made on account of boarding and lodging expenses on engineers u/s 37(2A) read with [ 2 ] Explanation 2 thereunder?” The quantum appeal filed by the assessee was decided by the Tribunal by placing reliance upon its earlier order dated 19.03.1993, passed in assessment year 1989-90. The assessment for the year 1989-90 was made subject matter of ITR No.410 of 1995 by forwarding a question identical to question No.
The reference was answered against the revenue on 02.07.2010. Question No.1 having already been answered against the revenue is answered in terms of order dated 07.10.2010, passed in ITR No.410 of 1995. However, there is another aspect of the first question that would require a degree of consideration. The first question apart from referring to Section 80-I(8) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') refers to Section 80-I(6) of the Act i.e. reallocation of expenses by the Assessing Officer. It would be appropriate to point out that in order pertaining to assessment year 1989-90, reallocation of income made by invoking Section 80-I(6) of the Act, was set aside by the Tribunal, by holding as follows: - “32. Now we come to the question as to whether the learned CIT (A) was justified in saying that the provisions of section 80-I(6) were applicable in this case and hence the expenses could be re-allocated amongst the various units on that basis. Section 80-I(6) stipulates that notwithstanding anything contained in any other provisions of the Income-tax Act, the profits and gains of an industrial undertaking for the purposes of determining the quantum of deduction u/s 80-I (I) would be deemed to be the only source of income of the assessee.
[ 3 ] This sub-section was enacted to meet a particular situation. This sub-section was enacts a provision of over-riding nature and lays down a special mode for computation of profits and gains eligible for deduction u/s 80-I. For the purpose of determining the quantum of “tax holiday” profits u/s 80-I, the taxable income of the eligible industrial undertaking etc. is to be ascertained as if such industrial undertaking were an independent unit owned by the assessee concerned and the assessee had no other source of income. The purpose of this sub-section was that the unabsorbed loss, unabsorbed depreciation etc. relating to the eligible industrial undertaking etc. relating to the eligible industrial undertaking etc. should be taken into account in determining the quantum of deduction u/s 80-I even though these may actually have been set off against the profits of the assessee from other sources. The celebrated authors Chaturvedi and Pithisaria in fourth Edition of their “income-tax law” have also expressed a similar view with regard to the interpretation of section 80-I(6) at page 2594. 33. If the scope of section 80-I(6) is what has been explained above, then thus subsection does not also give a handle to the Revenue authorities to re-allocate the expenses in various units. In our considered view, the entire exercise embarked upon by the Assessing Officer and the learned CIT(A) regarding re-allocation of expenses was not called for and the aforesaid sections, namely, section 80-I(8) and section 80-I(6) do not clothe the Revenue authorities to re-allocate the expenses particularly when the assessee has been maintaining regular books of account and production record in respect of each unit and the assessee's claim u/s 80-I has been accepted in the past. We, therefore, hold that there was no justification for re-allocating various expenses as done by the Revenue authorities to compute deduction u/s 80-I of the Act.” While seeking a reference against this order the revenue did not seek reference by invoking Section 80-I(6) of the Act. The reference was admittedly answered against the revenue in ITR No.410 of 1995, decided on 02.07.2010. This apart, the revenue has [ 4 ] already accepted correctness of order dated 19.03.1993, passed by the Tribunal pertaining to the assessment year 1988-89. Counsel for the revenue is unable to refer to any distinguishing feature that would enable us to hold that the revenue could have after accepting order passed in assessment year 1989-90, pertaining to reallocation of income, call upon this Court to answer a question relating to Section 80-I(6) of the Act. In this view of the matter, we hold that the Tribunal was not justified in making a reference relating to reallocation of income under Section 80-I(6) of the Act. The second question of law has already been answered/decided by this Bench in ITR No.124 of 1997 on 29.10.2013 “The Commissioner of Income Tax (Central) Ludhiana Versus M/s Nahar International Limited, Ludhiana, and is, therefore, answered accordingly. The reference is disposed of accordingly.
[ RAJIVE BHALLA ] JUDGE 30.10.2013 [ DR. BHARAT BHUSHAN PARSOON ] shamsher JUDGE
Singh Shemsher 2013.12.13 16:32 I attest to the accuracy and integrity of this document Chandigarh
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