THE COMMISSIONER OF INCOME TAX CHD vs. M/S CHANDIAGRH INDUSTRIAL TOURISM

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ITA/243/2003HC Punjab & HaryanaPHHC01037105200329 September 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the substantial question of law raised in the appeal was covered against the revenue by a previous judgment of the same Court in CIT v. Chandigarh Industrial and General Development Corporation Limited, (2009) 319 ITR 85. Consequently, the appeals filed by the revenue were dismissed. The reasoning is that the precedent established in the cited case directly addressed and decided the issue of taxation on a receipt basis versus accrual basis for an assessee following the mercantile system. The ratio decidendi from the cited case would be that if an assessee follows the mercantile system, income should generally be taxed on accrual basis, but the specific facts and circumstances, as interpreted in the precedent, would govern the outcome. The operative direction was the dismissal of the appeals.

What were the facts?

The Commissioner of Income Tax (Revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench 'B'. The appeal pertains to the assessment year 1991-92 and challenges the ITAT's decision to allow the assessee, M/s Chandigarh Industrial Tourism Development Corporation Limited, to be taxed on a receipt basis rather than an accrual basis, despite the assessee following the mercantile system of accounting. The High Court of Punjab and Haryana at Chandigarh heard the appeal. The judgment also mentions ITA No. 387 of 2004, which involves common questions of law.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing the income of the assessee to be taxed on receipt basis and not on accrual basis, even though the assessee was following the mercantile system of accounting, under Section 260A of the Income Tax Act, 1961. Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, the fact that the ITAT allowed taxation on a receipt basis implies the assessee likely argued for this treatment. Revenue's Contention: The revenue, through its counsel, argued that the ITAT was not right in allowing the income to be taxed on a receipt basis when the assessee was following the mercantile system of accounting. The revenue's appeal is based on this contention.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 243 of 2003 Date of decision: 29.9.2010 The Commissioner of Income Tax, Chandigarh -----Appellant Vs. M/s Chandigarh Industrial Tourism Development Corporation Limited ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Ms. Urvashi Dhugga, Advocate for the revenue. Ms. Radhika Suri, Advocate for the respondent. Adarsh Kumar Goel,J. This order will dispose of ITA Nos.243 of 2003 and 387 of 2004 as learned counsel for the parties agree that both the appeals involve common question. In ITA No.243 of 2003, appeal of the revenue is under section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) against order of the Income Tax Tribunal, Chandigarh Bench ‘B’ Chandigarh dated 21.4.2003 in ITA No.744/Chandi/97 for the assessment year 1991-92, raising following substantial question of law:- “Whether on the facts and in the circumstances of the case, the ITAT was right in law in allowing the income of the assessee to be taxed on receipt basis and not on accrual basis even though the assessee was following mercantile system of accounting?”

Learned counsel for the parties further agree that the said question is covered against the revenue by judgment of this Court in CIT v. Chandigarh Industrial and General Development Corporation Limited, (2009) 319 ITR 85. Accordingly, these appeals are dismissed. (Adarsh Kumar Goel) Judge September 29, 2010 (Ajay Kumar Mittal) ‘gs’ Judge 2

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