COMMISSIONER OF INCOME TAX GANDHINAGAR vs. M/S GUJARAT STATE CIVIL SUPPLIES CORPORATION LTD

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TAXAP/239/2011HC GujaratGJHC24025088201112 June 2012Author: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the interest paid by the assessee to the Government of Gujarat is an allowable deduction. The Court found no illegality in the order passed by the Income Tax Appellate Tribunal. The reasoning provided by the CIT(A) and the Tribunal, which was accepted by the High Court, was that since interest paid to the Government of Gujarat had been allowed as a deduction in an earlier year, there was no justification for the assessing officer to disallow it in the current assessment. The Court further observed that the proposed question of law did not raise any question of law, let alone a substantial question of law. Therefore, the Tax Appeal filed by the Revenue was dismissed.

What were the facts?

The Revenue, Commissioner of Income Tax, Gandhinagar, filed a Tax Appeal before the High Court of Gujarat challenging an order of the Income Tax Appellate Tribunal (ITAT) dated July 9, 2010. The ITAT had upheld the orders of the Commissioner of Income Tax (Appeals) [CIT(A)]. The core of the dispute was the deletion of interest payment made by the assessee, M/s Gujarat State Civil Supplies Corporation Ltd., to the Government of Gujarat. The assessing officer had disallowed this interest, but the CIT(A) and subsequently the ITAT allowed its deletion, deeming it an allowable deduction. The appeal was heard by a division bench of the High Court.

What were the issues?

1. Whether the interest payment made by the assessee to the Government of Gujarat is an allowable deduction under the Income Tax Act, 1961? The Revenue contended that the ITAT's order upholding the deletion of interest payment was illegal. The Revenue's argument was that the CIT(A) and the Tribunal were incorrect in allowing the deduction. The Revenue's specific reasoning, as recorded in the judgment, was that in an earlier year, interest paid to the Government of Gujarat had been allowed as a deduction, and therefore, there was no reason for the assessing officer not to allow it in the present case. The Revenue did not explicitly name any specific section of the Income Tax Act, 1961, that was contravened, but the issue revolved around the deductibility of interest expenses. The assessee did not appear before the High Court.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

TAXAP/239/2011 1/2 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 239 of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX GANDHINAGAR - Appellant(s) Versus M/S GUJARAT STATE CIVIL SUPPLIES CORPORATION LTD - Opponent(s) ========================================================= Appearance : MRS MAUNA M BHATT for Appellant(s) : 1, None for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 12/06/2012

ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE V. M. SAHAI)

TAXAP/239/2011 2/2 JUDGMENT

We have heard Mrs. Mauna M. Bhatt, learned counsel for the Revenue. This Tax Appeal has been filed challenging the order of the Income Tax Appellate Tribunal dated 09.07.2010 by which the Tribunal has upheld the orders of the CIT(A), which has allowed deletion of interest payment to the Government of Gujarat. Interest paid by an assessee to Government of Gujarat is an allowable deduction, and therefore, we do not find any illegality in the order passed by the Income Tax Appellate Tribunal. The reason given by the CIT(A) and the Tribunal is that in the earlier year the interest paid to Government of Gujarat has been allowed to be deducted, therefore, there is no reason for the assessing officer not to allow the interest paid to Government of Gujarat. The proposed question of law does not raise any question of law much less any substantial question of law. The Tax Appeal is accordingly dismissed. (V.M. SAHAI, J.) (N.V. ANJARIA, J.) (SN DEVU PPS)

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