MEHSANA DIST.CO.OP.MILK PRODU-CERS' UNION LTD. vs. COMMISSIONER OF INCOME-TAX

ITR/72/1997HC GujaratGJHC24020236199710 March 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE Z.K.SAIYED3 pages
AI SummaryDismissed

What were the facts?

The assessee, Mehsana Dist. Co. Op. Milk Producers' Union Ltd., Mehsana, is in appeal against an order of the Income-tax Appellate Tribunal, Ahmedabad Bench 'C'. The appeal is a reference under Section 256(1) of the Income-tax Act, 1961, for Assessment Year 1988-89. The core of the dispute concerns amounts transferred to a Reserve Fund Account as per Section 67 of the Gujarat Co-operative Societies Act, 1961. The assessee sought to treat this transfer as a diversion of income at source or as business expenditure deductible under the Income-tax Act. The revenue contested this treatment. The High Court noted that the issue was concluded by a judgment rendered on the same day between the same parties in I.T.R. No. 65 of 1997.

What did the High Court hold?

The High Court held that both questions referred to it were concluded by a judgment rendered on the same day between the same parties in I.T.R. No. 65 of 1997. Consequently, for the reasons stated in that prior judgment, both questions were answered in the affirmative, meaning in favour of the Revenue and against the assessee. The Tribunal's finding that the amount transferred to the Reserve Fund Account under Section 67 of the Gujarat Co-operative Societies Act, 1961, was not a diversion of income at source by overriding title was upheld. Furthermore, the Tribunal's decision that such a transfer could not be treated as business expenditure and allowed as a deduction under Sections 28/37 of the Income-tax Act, 1961, was also affirmed. The reference was disposed of accordingly, with no order as to costs. The operative direction was to answer the questions in favour of the Revenue.

What were the issues?

The Tribunal had to decide two questions of law, referred at the instance of the assessee for Assessment Year 1988-89: 1. Whether, on the facts and circumstances, the Tribunal was right in law in holding that the amount transferred to the Reserve Fund Account, as per Section 67 of the Gujarat Co-operative Societies Act, 1961, was not a diversion of income at source by overriding title? 2. Whether, on the facts and circumstances, the Tribunal was right in law in holding that the transfer to the reserve fund cannot be treated as a business expenditure and allowed deduction under Sections 28/37 of the Income-tax Act, 1961? Assessee's Contentions: The assessee argued that the transfer to the Reserve Fund was a diversion of income at source by overriding title, and alternatively, that it constituted business expenditure deductible under Sections 28/37 of the Income-tax Act. Revenue's Contentions: The judgment records no specific contentions for the revenue, but it is implicit that the revenue opposed the assessee's claims regarding diversion of income and business expenditure.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 67,Section 28,Section 37

AI-generated summary — verify with the full judgment below

ITR/72/1997 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.72 of 1997 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MR.JUSTICE Z.K.SAIYED =================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 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 ? NO 5 Whether it is to be circulated to the civil judge ? NO =================================================== MEHSANA DIST. CO.OP.MILK PRODUCERS' UNION LTD. MEHSANA - Applicant(s) Versus COMMISSIONER OF INCOME TAX - Respondent(s) =================================================== Appearance : MR MANISH J SHAH for Applicant(s) : 1, MR MANISH R BHATT for Respondent(s) : 1, =================================================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 10/03/2008 ORAL JUDGMENT

The order continues below.

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