COMMISSIONER OF INCOME TAX vs. GUJARAT REFRATORIES LIMITED

ITR/2/1999HC GujaratGJHC24025160199931 August 2006Author: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE R.S.GARG3 pages
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What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'B', referred a question of law to the High Court of Gujarat concerning Income Tax Appeal No. 4525/Ahd/1991 for the assessment year 1991-1992. The dispute involved the levy of additional tax under Section 143(1A) of the Income Tax Act. The Commissioner of Income Tax (CIT) was the applicant (revenue), and Gujarat Refratories Limited was the respondent (assessee). The assessee had filed a return of loss. The CIT(Appeals) and the ITAT had cancelled the additional tax levied, holding it was not leviable on negative income. The revenue challenged this decision.

What did the High Court hold?

The High Court held that the order of the CIT(Appeals) and the Tribunal confirming the cancellation of additional tax levied under Section 143(1A) was incorrect. The Court relied on the authoritative pronouncement of the Supreme Court in Assistant Commissioner Income Tax V. J.K. Synthetics Limited and Union of India V. Modi Cement, which held that in view of the retrospective amendment of Section 143(1A), the Assessing Officer is entitled to demand additional tax even on a return of loss, if it is converted into a return of profit after adjustments. Consequently, the High Court quashed the orders of the CIT(Appeals) and the Tribunal. The reference was answered in favour of the revenue. No issue was expressly left undecided.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) cancelling the additional tax levied u/s. 143(3)(1A) on the ground that such additional tax was not leviable on negative income? Assessee's Contention: The assessee contended that additional tax under Section 143(1A) was not leviable on negative income. This contention was upheld by the CIT(Appeals) and the Tribunal. Revenue's Contention: The revenue contended that additional tax was leviable even on a return of loss, provided it was converted into a return of profit after adjustments. The revenue relied on the Supreme Court's decision in Assistant Commissioner Income Tax V. J.K. Synthetics Limited and Union of India V. Modi Cement reported in (2001) 251 ITR 200.

Which sections of the Income-tax Act were involved?

Section 143(1A)

AI-generated summary — verify with the full judgment below

ITR/2/1999 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 2 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 ? ========================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus GUJARAT REFRATORIES LIMITED - Respondent(s) ========================================================= Appearance : MR MANISH R BHATT for Applicant(s) : 1, SERVED BY RPAD - (N) 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/2/1999 2/3 JUDGMENT Ms Mona B

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