COMMISSIONER OF INCOME TAX vs. DIGVIJAY CEMENT CO.LTD.

ITR/125/1996HC GujaratGJHC24021805199613 February 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE Z.K.SAIYED6 pages
AI SummaryAllowed

What were the facts?

The Commissioner of Income Tax (CIT) filed a reference before the High Court of Gujarat challenging an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had upheld the order of the Commissioner of Income-tax (Appeals) which rejected an application by the Assessing Officer (AO) under Section 154 of the Income Tax Act, 1961. The AO sought to rectify his assessment orders for assessment years 1982-83 and 1983-84 to exclude interest on deferred payment for machinery purchases from the actual cost, citing Explanation 8 to Section 43(1) inserted retrospectively. The assessee, Digvijay Cement Co. Ltd., contended that the issue was debatable. The AO initiated rectification proceedings on July 1, 1988, relying on the retrospective insertion of Explanation 8.

What did the High Court hold?

The High Court held that the Appellate Tribunal was right in law and on facts in confirming the order of the Commissioner (Appeals). The Court reasoned that at the time the rectification proceedings were undertaken by the Assessing Officer (July 1, 1988), the decision of the Madras Bench of the Tribunal in INDIA PISTONS REPCO LTD. v/s. INSPECTING ASSISTANT COMMISSIONER, rendered on January 14, 1988, was available and expressed a contrary view regarding the same provisions. Therefore, the issue was indeed debatable. The Court relied on the Apex Court's decision in T.S. BALARAM, INCOME-TAX OFFICER, COMPANY CIRCLE-IV, BOMBAY v/s. VOLKART BROTHERS & OTHERS, which states that rectification cannot be resorted to when there are conceivably two opinions on the interpretation of a provision. Consequently, the Tribunal was justified in upholding the Commissioner (Appeals)'s order rejecting the AO's application under Section 154. The question referred to the Court was answered in the affirmative, in favour of the assessee and against the Revenue.

What were the issues?

1. Whether the Appellate Tribunal was right in law and on facts in confirming the order made by the Commissioner of Income-tax (Appeals) rejecting the application made by the Assessing Officer under Section 154 for excluding interest on deferred payment on purchase of machineries in view of Explanation 8 to Section 43(1) with retrospective effect? Assessee's contentions: The assessee argued that the issue was debatable in nature, and therefore, rectification under Section 154 was not permissible. The assessee relied on the decision of the Madras Bench of the Tribunal in INDIA PISTONS REPCO LTD. v/s. INSPECTING ASSISTANT COMMISSIONER, rendered on January 14, 1988, which had decided an identical issue in favour of the assessee. Revenue's contentions: The Revenue, through the Assessing Officer, initiated rectification proceedings based on Explanation 8 to Section 43(1), which was inserted by the Finance Act, 1986, with retrospective effect from April 1, 1974. The Revenue did not accept the assessee's contention that the issue was debatable and that Section 154 was inapplicable due to conflicting views.

Which sections of the Income-tax Act were involved?

Section 256(2),Section 154,Section 43(1),Section 143(3)

AI-generated summary — verify with the full judgment below

ITR/125/1996 1/6 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 125 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 ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 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 ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus DIGVIJAY CEMENT CO.LTD. - Respondent(s) ========================================================= Appearance : MR MANISH R BHATT for Applicant(s) : 1, SERVED BY RPAD - (N) for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 13/02/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

ITR/125/1996 2/6 JUDGMENT 1.

The order continues below.

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