M/S.KERALA TRANSPORT CO.,Y.M.C.A.ROAD, vs. THE COMMR. OF INCOME TAX, CALICUT

PDF · subscribers

ITA/186/2000HC KeralaKLHC01015267200026 May 2008Author: HONOURABLE MR.JUSTICE V.K.MOHANAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR3 pages

AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, upholding the Tribunal's order. The Court found the assessee's claim untenable based on the Tribunal's factual finding that the assessee charged its sister concern rates below the cost price for tyre retreading. The Court reasoned that the assessee's activity was not a business activity but a service to the sister concern, and the financial result was the assessee's own choice. The Court held that the assessee was not entitled to any benefit from its own device to avoid tax, and the loss incurred by charging below cost was disallowable. Therefore, the Court found no grounds to interfere with the Tribunal's order.

What were the facts?

The assessee, M/s. Kerala Transport Company, engaged in tyre retreading, claimed a set off of a loss amounting to Rs. 2,19,565/-. This loss arose from providing retreading services to a sister concern at rates below the cost price. The Assessing Officer rejected this claim and made an addition to the assessee's income. While the CIT(Appeals) allowed the claim, the Income Tax Appellate Tribunal (ITAT) reversed the appellate order, restoring the addition. The assessee appealed this ITAT order to the High Court under Section 260A of the Income Tax Act.

What were the issues?

1. Whether the Tribunal was justified in disallowing the loss claimed by the assessee amounting to Rs. 2,19,565/- (Question of law). The assessee contended that the loss incurred from providing services to its sister concern should be allowed as a set off against its income. The revenue argued that the assessee's activity was not a genuine business activity but merely a service to a sister concern, and the decision to charge below cost was a deliberate choice leading to a disallowable loss. The revenue relied on the Tribunal's finding that the assessee charged below cost price.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN MONDAY, THE 26TH MAY 2008 / 5TH JYAISHTA 1930 ITA.No. 186 of 2000() --------------------- ITA.666/COCH/1992 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT ----------------- M/S.KERALA TRANSPORT COMPANY, Y.M.C.A. ROAD, CALICUT, REP. BY ITS MANAGING PARTNER, P.V.CHANDRAN. BY ADV. SRI.C.KOCHUNNY NAIR SRI.DALE P.KURIEN RESPONDENTS: ------------- THE COMMISSIONER OF INCOME-TAX, CALICUT. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 26/05/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... I.T. Appeal No.186 of 2000 .................................................................... Dated this the 26th day of May, 2008.

JUDGMENT Ramachandran Nair, J. The question raised in the appeal filed by the assessee is whether the Tribunal was justified in disallowing the loss claimed amounting to Rs.2,19,565/-.

The assessee was engaged in tyre retreading mainly for it's own purpose and it has done business for a sister concern. The sister concern was charged for the tyre retreading work at below the cost price which led to a loss of Rs.2,19,565/-. The assessee claimed set off of this loss against it's income. The Assessing Officer rejected the same and made addition of the claim of loss. Even though C.I.T.(Appeal) allowed, the Tribunal reversed the first appellate order and restored the addition. It is against this order of the Tribunal that the assessee has come up before this court in the appeal filed under Section 260A of the Income Tax Act.

We do not think the claim is tenable because on facts the Tribunal found that the assessee was charging rates at below the cost price for retreading tyres for the sister concern. In fact assessee's activity itself is not 2 business activity and it is only doing a service to the sister concern. The financial result is assessee's own choice in as much as assessee chose to sustain loss by charging below the cost price. We do not think the assessee is entitled to any benefit of it's own device to avoid tax. In view of the clearcut finding by the Tribunal that assessee has charged it's sister concern below the cost price which is a loss disallowable, we do not find any ground to interfere with the order of the Tribunal. Consequently we dismiss the appeal. C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge pms

Recent GST High Court judgments

Search GST case law →