C I T vs. M/S LIBERTY SHOES LTD.

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ITA/140/2007HC Punjab & HaryanaPHHC01072814200728 February 2011Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue regarding the nature of expenses incurred on glow sign boards was no longer res integra. The Court referred to its own decision in Commissioner of Income Tax vs. Liberty Group Marketing Division (2009) 315 ITR 125. In that case, it was held that glow sign boards are not assets of a permanent nature and require frequent replacement. The Court further held that expenditure incurred on glow sign boards is to facilitate business operations and is allowable as revenue expenditure. Therefore, the substantial question of law was answered against the Revenue. The appeal was dismissed as it lacked merit.

What were the facts?

The Revenue, Commissioner of Income Tax (Central), Ludhiana, filed an appeal under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT) dated July 14, 2006. The ITAT's order related to assessment year 1997-98 and had upheld the Commissioner of Income-tax (Appeals) decision. The assessee, M/s. Liberty Shoes Ltd., had declared an income of Rs. 3,03,15,470/- for the assessment year. The Assessing Officer treated an investment of Rs. 1,28,280/- on Neon Sign Boards as capital expenditure. The CIT(A) allowed this deduction, following previous orders concerning the assessee and its sister concern. The ITAT dismissed the Revenue's appeal against the CIT(A)'s order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in confirming the order of the CIT(A) that expenses of Rs. 1,28,280/- incurred on glow signs were of revenue nature, turning on Section 37 of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that the expenditure on glow signs was revenue in nature. (No specific authorities or precedents were mentioned in the judgment for the assessee's argument). Revenue's Contention: The Revenue contended that the expenses incurred on glow signs were capital in nature. (No specific authorities or precedents were mentioned in the judgment for the Revenue's argument).

Which sections of the Income-tax Act were involved?

Section 260A,Section 37

AI-generated summary — verify with the full judgment below

Income Tax Appeal No. 140 of 2007 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 140 of 2007 Date of decision: 28.2.2011 Commissioner of Income Tax (Central) Ludhiana --- Appellant Versus M/s. Liberty Shoes Ltd. --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Ms. Urvashi Dhugga, Senior Standing Counsel for the appellant-Revenue. Mr. S.K. Mukhi and Ms. Jyoti, Advocates for the respondent. --- AJAY KUMAR MITTAL, J. The paper-book of this case has not been received from the concerned Branch as the same is said to have burnt in the fire incident that took place in the premises of this Court on the night of 30th of January, 2011. Learned counsel for the appellant has made available two copies of paper-book to the Court for reconstruction of the file. The said copies are taken on record and the file of the appeal is treated as having been re-constructed.

2.

This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the Revenue against the order dated

Income Tax Appeal No. 140 of 2007 2 14.7.2006, passed by the Income Tax Appellate Tribunal Delhi Bench ‘D’, Delhi (in short “the Tribunal”) in ITA No. 2368(Del)2002, relating to the assessment year 1997-98. 3. The following substantial question of law has been claimed for determination by this Court: “Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in confirming the order of the CIT(A) that expenses of Rs. 1,28,280/- incurred on glow signs were of revenue nature?

4.

The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee is manufacturer of leather and non-leather shoes. The assessee filed return for the assessment year in question declaring income of Rs. 3,03,15,470/- on 28.11.1997. The assessing officer made disallowances and additions and treated the investment of Rs. 1,28,280/- on Neon Sign Boards as expenditure of capital nature. The assessment under Section 143(3) of the Act was completed at an income of Rs. 3,11,22,740/- vide order dated 29.2.2000. The Commissioner of Income-tax (Appeals) {in short “the CIT(A)”}, in the appeal preferred by the assesses following the orders under Section 250 (6) for the assessment years 1995-96 and 1996-97 and of the Tribunal for the assessment years 1996-97 and 1997-98, passed in the case of sister concern of the assessee, M/s. Liberty Group Marketing Division, allowed *rkmalik*

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