M/S.KRISHNA TEXTILES vs. COMMISSIONER OF INCOME TAX

ITR/9/1997HC GujaratGJHC24020173199712 October 2006Author: HONOURABLE MR. JUSTICE D.H.WAGHELA,HONOURABLE MR. JUSTICE R.S.GARG4 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s. Krishna Textiles, is challenging the order of the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench "C". The ITAT has referred two questions of law to the High Court of Gujarat for opinion. These references arise from two separate appeals: ITA No. 507/Ahd/1993 concerning Assessment Year 1988-89 and ITA No. 1837/Ahd/94 concerning Assessment Year 1987-88. The core of the dispute revolves around the taxability of excise duty collected by the assessee on grey fabrics and the applicability of Section 43-B of the Income Tax Act, 1961, in relation to bank guarantees furnished as margin money.

What did the High Court hold?

The High Court, in its oral judgment, disposed of both Income Tax References (ITR No. 9/97 and ITR No. 10/97) by referring to its decision in an identical matter concerning the same assessee (ITR 106/96). The Court held that the excise duty collected by the assessee on grey fabrics was indeed in the nature of trading receipts and was taxable under Section 43-B of the Income Tax Act. Furthermore, the Court affirmed that a bank guarantee furnished by the assessee, secured by depositing the amount in a bank fixed deposit as margin money, did not amount to actual payment. Consequently, Section 43-B was held to be applicable in such a scenario. Both questions were answered against the assessee and in favour of the Revenue. The operative direction was that the references stand disposed of, with no costs awarded.

What were the issues?

The Tribunal had to decide the following questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Excise Duty collected by the assessee on grey fabrics was in the nature of trading receipts and hence taxable u/s. 43-B of the Act? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the bank guarantee furnished by the assessee which was taken by the assessee by depositing the amount in bank fixed deposit as margin money did not tantamount to actual payment and so Section 43-B is applicable? Assessee's Contentions: The judgment does not record specific contentions made by the assessee. However, the questions referred imply that the assessee argued against the taxability of excise duty as trading receipts and against the applicability of Section 43-B, likely contending that the bank guarantee constituted actual payment. Revenue's Contentions: The judgment does not record specific contentions made by the revenue. However, the questions referred imply that the revenue argued in favour of the taxability of excise duty as trading receipts and the applicability of Section 43-B, likely arguing that the bank guarantee did not amount to actual payment.

Which sections of the Income-tax Act were involved?

Section 43-B

AI-generated summary — verify with the full judgment below

ITR/9/1997 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 9 of 1997 With INCOME TAX REFERENCE No. 10 of 1997 For Approval and Signature: HONOURABLE MR.JUSTICE R.S.GARG HONOURABLE MR.JUSTICE D.H.WAGHELA ========================================================= 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 ? ========================================================= M/S.KRISHNA TEXTILES - 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 R.S.GARG and HONOURABLE MR.JUSTICE D.H.WAGHELA Date : 12/10/2006

ITR/9/1997 2/4 JUDGMENT ORAL JUDGMENT (Per : HONOURA

The order continues below.

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