COMMISSIONER OF INCOME-TAX vs. HINTEX MILLS

ITR/129/1994HC GujaratGJHC24020206199429 September 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI5 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 Assessment Year 1982-83. The assessee, Hintax Mills, claimed an expenditure of Rs. 41,309/- paid to Gujarat State Industrial Development Corporation (GIDC) for a plot as revenue expenditure. The Assessing Officer allowed this claim. However, the Commissioner of Income-tax (CIT) initiated proceedings under Section 263 of the Income Tax Act, 1961, holding the assessment order erroneous and prejudicial to the revenue, as the expenditure should have been treated as capital. The ITAT, in its order dated September 9, 1985, allowed the assessee's appeal, finding the expenditure to be revenue in nature.

What did the High Court hold?

The High Court held that the Tribunal was right in law in holding the expenditure of Rs.41,309/- as revenue expenditure. The reasoning was based on two primary findings of fact by the Tribunal, which remained undisturbed. Firstly, similar expenditure incurred by the assessee for the subsequent Assessment Year 1983-84 had been allowed by the Revenue itself as revenue expenditure, and that assessment had become final. Secondly, the Tribunal found that the assessee had not purchased the land from GIDC but had entered into it as a licensee. Therefore, the payment was considered charges for carrying on business, not for establishing the business. The High Court found no infirmity in the Tribunal's order. The question was answered in the affirmative, in favour of the assessee and against the Revenue. The reference was disposed of accordingly.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that an expenditure of Rs.41,309/- made by the assessee towards payment to the Gujarat State Industrial Development Corpn. for the plot was a revenue expenditure, turning on Section 37 of the Income Tax Act, 1961. Assessee's Contention: Not recorded in the judgment. Revenue's Contention: The Tribunal committed an error in disturbing the order of the Commissioner of Income-tax. The revenue reiterated the Commissioner's reasons that the expenditure should have been treated as capital expenditure. The revenue urged the High Court to reverse the Tribunal's order and answer the question in its favour.

Which sections of the Income-tax Act were involved?

Section 37,Section 143(3),Section 256(2),Section 263

AI-generated summary — verify with the full judgment below

ITR/129/1994 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.129 of 1994 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ===================================================== 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 HINTEX MILLS - Respondent(s) ===================================================== Appearance : MR MANISH R BHATT for Applicant(s) : 1, NOTICE SERVED for Respondent(s) : 1, ===================================================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 29/09/2005 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

1.

The Income-tax Appellate Tribunal, Ahmedab

The order continues below.

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