COMMISSIONER OF INCOME TAX vs. NEW BHARAT ENGINEERING WORKS LTD.

ITR/264/1995HC GujaratGJHC24022587199521 August 2006Author: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE R.S.GARG3 pages
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What were the facts?

This case involves an Income Tax Reference filed by the Commissioner of Income Tax against M/s. New Bharat Engineering Works Ltd. for Assessment Years 1985-86, 1986-87, and 1987-88. The reference concerns two questions of law that were previously decided by the Income-Tax Appellate Tribunal. An earlier reference (I.T.R. No. 82 of 1995) between the same parties on identical disputes had already been decided by this Court. The present reference seeks the opinion of the High Court on whether the Appellate Tribunal was correct in directing the Assessing Officer to work out a deduction under Section 80-I despite the assessee not maintaining separate books of accounts for the new unit and showing a loss, and whether the Tribunal was correct in directing the calculation of disallowance under Rule 6D with reference to all tours made by a person during the previous year, rather than individual tours.

What did the High Court hold?

The High Court answered the first question in favour of the Assessee, relying on the judgments in Commissioner of Wealth Tax vs. Chander Sen, [161 I.T.R. 370], and C.I.T. vs. J.K. Synthetics Ltd., [182 I.T.R. 125]. This implies that the Tribunal was correct in directing the Assessing Officer to work out the deduction under Section 80-I, even without separate books of accounts for the new unit and despite a loss being shown. For the second question, the High Court answered in favour of the Revenue, relying on judgments in C.I.T. vs. Coromandel Fertilizers Ltd., [(1996) 220 I.T.R. 298], C.I.T. vs. Porritts and Spencer (Asia) Ltd., [241 I.T.R. 126), and a previous judgment of the same Court in Income Tax Reference No.54 of 1988. The reasoning was that the limits laid down in Rule 6D must be applied with reference to each trip of an individual employee, not by grouping all tours undertaken by an employee during the year. The reference was disposed of accordingly.

What were the issues?

The High Court was asked to decide the following questions of law: 1. Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to work out deduction u/s. 80-I, though no separate books of accounts were for the new unit and the assessee had shown loss? 2. Whether the Appellate Tribunal is right in law and on the facts in directing the Assessing Officer to calculate the amount for disallowance under Rule 6D with reference to all the tours made by the person during the previous year and not with reference to individual tour? Assessee's contentions: Not recorded in the judgment. Revenue's contentions: Not recorded in the judgment, except implicitly through the questions referred and the reliance on previous judgments.

Which sections of the Income-tax Act were involved?

Section 80-I

AI-generated summary — verify with the full judgment below

ITR/264/1995 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE NO. 264 OF 1995 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 M/S. NEW BHARAT ENGINEERING WORKS LTD. - Opponent(s) ========================================================= Appearance : MRS. MONA BHATT for MR. MANISH R. BHATT for Applicant(s).

None for the Assessee though served. ========================================================= CORAM : HONOURABLE MR.JUSTICE R.S.GARG and HONOURABLE MR.JUSTICE M.R. SHAH Date : 21/08/2006 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE R.S.GARG)

The order continues below.

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