SARABHAI PVT. LTD. vs. COMMISSIONER OF INCOME TAX

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ITR/31/1999HC GujaratGJHC24025189199931 August 2006Author: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE R.S.GARG3 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court held that the Assessing Officer was fully justified in granting only 1/6th of the income towards repairs. The Commissioner of Income Tax (Appeals) and the Tribunal were also justified in holding against the assessee. The reasoning is based on a previous judgment of the High Court in a reported case [2003 (263) ITR 197] concerning the same assessee and similar disputes for assessment years 1974-75 and 1975-76. In that judgment, the Court had observed that the Tribunal was justified in accepting income from complex letting as business income and allowing 1/6th of the repairs of the properties in question. Therefore, the High Court answered the reference against the assessee and in favour of the revenue. The operative direction is to answer the question in favour of the revenue, and the reference stands disposed of.

What were the facts?

The assessee, Sarabhai Pvt. Ltd., incurred repair expenses of Rs. 2,23,553/- during the previous year relevant to assessment year 1978-79. The Assessing Officer (ACIT) disallowed Rs. 1,81,635/- of these expenses. This disallowance was upheld by the Commissioner of Income Tax (Appeals) and subsequently by the Income Tax Appellate Tribunal (ITAT) in ITA No. 5206/Ahd/1991. The ITAT relied on its earlier orders for the same assessee concerning assessment years 1976-77 and 1977-78. The High Court noted a previous judgment for assessment years 1974-75 and 1975-76, where it had decided a similar issue in favour of the revenue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the disallowance of repair expenses made by the assessee to the tune of Rs. 1,81,635/-? (Question of law turning on the interpretation of provisions related to allowability of repair expenses). Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the fact that the assessee incurred the expenses and challenged their disallowance implies a contention that the expenses were legitimate and deductible. Revenue's Contention: The judgment does not record any specific contentions made by the revenue before the High Court. However, the revenue's position, as upheld by the lower authorities and the High Court, is that the disallowance was justified.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
ITR/31/1999 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 31 of 1999 For Approval and Signature:  HONOURABLE MR.JUSTICE R.S.GARG  HONOURABLE MR.JUSTICE M.R. SHAH  =========================================================  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 ? =========================================================  SARABHAI PVT. LTD. - Applicant(s) Versus COMMISSIONER OF INCOME TAX - Respondent(s) =========================================================  Appearance : MR RK PATEL for Applicant(s) : 1, MR MANISH R BHATT for Respondent(s) : 1, ========================================================= CORAM :  HONOURABLE MR.JUSTICE R.S.GARG and HONOURABLE MR.JUSTICE M.R. SHAH Date : 31/08/2006

ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE R.S.GARG)

ITR/31/1999 2/3 JUDGMENT Income Tax Appellate Tribunal, Ahmedabad Bench “B” in relation to Income Tax Appeal No.5206/Ahd/1991 relating to accounting assessment year 1978-79, has referred the following question to the High Court in its opinion. “Whether on the facts and in the circumstances of the case the Tribunal was justified in confirming the disallowance of repair expenses made by the assessee to the tune of Rs.1,81,635/-?”

2.

The short facts necessary for disposal of the present Reference are that the assessee has incurred repairs expenses to the tune of Rs.2,23,553/- during the relevant previous year. The ACIT disallowed the expenditure to the tune of Rs.1,81,635/- and the order was confirmed by CIT (Appeals). The order passed by the Assessing Officer and upheld by the CIT (Appeals) was confirmed by the Tribunal. While confirming the said order, the Tribunal relied upon its earlier orders, which were in the same assessee's matter in ITA Nos.2100 and 2101/A/80 for the assessment years 1976-77 and 1977-78 respectively. It is to be noted that in relation to the ITR/31/1999 3/3 JUDGMENT very same dispute between the same parties, for the assessment year 1974-75 and 1975-76, in a reported judgment of this Court [2003 (263) ITR 197], the Court had decided the very same question in favour of the revenue. The Court has observed that the Tribunal was justified in accepting the income from complex letting as income from business and the Tribunal was justified in allowing 1/6th repairs of the properties in question in place of repairs to building at Rs.2,08,118.00 and Rs.1,94,476.00 for the assessment year 1975-76. 3. In view of the said judgment, we must hold that the Assessing Officer was fully justified in granting 1/6th of the income towards repairs. The Commissioner, Income Tax (Appeals) and the Tribunal were also justified in holding against interest of the assessee. We answer the question against the assessee and in favour of revenue. The Reference stands disposed of. No costs. (R.S.GARG,J.) (M.R.SHAH,J.) shekhar/-

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