MEHSANA DIST.CO.OP.MILK PRODUCERS' UNION LTD. vs. COMMISSIONER OF INCOME TAX

ITR/86/1996HC GujaratGJHC24021766199610 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 the order of the Income-tax Appellate Tribunal, Ahmedabad Bench 'B'. The Tribunal had referred two questions of law for the Assessment Years 1983-84 to 1986-87 at the instance of the assessee. The core of the dispute pertains to the treatment of 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 a business expenditure deductible under the Income-tax Act, 1961. The revenue, however, contested this treatment.

What did the High Court hold?

The High Court held that the issue raised by both questions was concluded by a judgment rendered on the same day between the same parties in I.T.R. No. 65 of 1997. Following the reasoning in that judgment, the High Court answered both questions 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. Consequently, the transfer to the reserve fund could not be treated as a business expenditure and allowed as a deduction under Sections 28/37 of the Income-tax Act, 1961. The reference was disposed of accordingly, with no order as to costs. No issue was expressly left undecided.

What were the issues?

The Tribunal was asked to decide two questions of law: 1. Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the amount transferred to Reserve Fund Account as per provisions of Sec. 67 of Gujarat Co-operative Societies Act, 1961 was not a diversion of income at source by over-riding title? 2. Whether on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the transfer to reserve fund cannot be treated as a business expenditure and allowed deduction under Sec. 28/37 of the Income-tax Act, 1961? The assessee contended that the transfer to the Reserve Fund was a diversion of income at source by overriding title and also a business expenditure deductible under Sections 28/37 of the Income-tax Act, 1961. The judgment does not record specific arguments made by the Revenue, but it implies that the Revenue's position was contrary to the assessee's claims.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

ITR/86/1996 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.86 of 1996 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 : SERVED BY RPAD - (N) 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 JUDGM

The order continues below.

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