BILESHWAR KHAND UDYOG SAHAKARI MANDLI LTD vs. COMMISSIONER OF INCOME-TAX

ITR/51/1994HC GujaratGJHC24020129199401 September 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI25 pages
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What were the facts?

This case involves an Income Tax Reference before the Gujarat High Court concerning multiple assessment years (1978-79 to 1983-84) for Bileshwar Khand Udyog Sahakari Mandli Ltd. (assessee) and the Commissioner of Income-tax (Revenue). The primary dispute for AY 1981-82 and 1982-83 relates to a deduction of Rs. 21,67,041/- claimed by the assessee, arising from excess realization of levy sugar prices under an interim High Court order, which was later directed to be paid into a Levy Sugar Price Equalisation Fund. For AY 1978-79 to 1980-81, the dispute concerns the deductibility of provisions for interest on sales tax. For AY 1979-80 to 1983-84, the issue is the allowability of guest house expenses.

What did the High Court hold?

The High Court answered the question referred at the instance of the assessee (AY 1981-82 and 1982-83) in the affirmative, in favour of the Revenue and against the assessee. The Court held that the liability to pay the excess realization along with interest was statutorily fastened by the Levy Sugar Price Equalisation Fund Act, 1976, within thirty days of its commencement. Therefore, the assessee's contention that the liability arose only by virtue of the High Court judgment dated 02.05.1980 or the Supreme Court order dated 31st July, 1980, was rejected. The Tribunal was justified in holding that the liability had not arisen in AY 1981-82 or 1982-83. For the questions referred by the Revenue concerning interest on sales tax (AY 1978-79 to 1980-81), the Court held that the Tribunal was justified in allowing the provisions of interest as a deduction, not disturbing the concurrent orders of the CIT(A) and Tribunal, as the right to claim deduction was not disputed and the assessment years involved were 1978-79 to 1979-80. For guest house expenses (AY 1979-80 to 1983-84), the Court held that the Tribunal was right in directing the Assessing Officer to allow the deduction, following its own earlier order and a High Court decision. The reference was disposed of accordingly.

What were the issues?

1. Whether, on the facts and circumstances, the Tribunal was justified in law in holding that the liability to claim deduction of Rs. 21,67,041/- had not arisen and the assessee was not entitled to claim the same either in AY 1981-82 or AY 1982-83, despite discharging the liability by payment based on final judgments of the Gujarat High Court and the Supreme Court of India? (Assessee's contention: The liability arose only upon the High Court's judgment on 02.05.1980, making it deductible in AY 1981-82 or 1982-83. Relied on Saurashtra Cement and Chemical Industries Ltd. vs. CIT and CIT vs. Swadeshi Cotton and Flour Mills Private Limited. Revenue's contention: The liability arose earlier due to the Levy Sugar Price Equalisation Fund Act, 1976, and the High Court's order dated 02.05.1980, and interest was statutorily fastened in 1976). 2. Whether the Appellate Tribunal is right in law and on facts in directing the assessing officer to allow the provision of interest made by the assessee as deduction for AYs 1978-79 to 1980-81? (Assessee's contention: Not recorded. Revenue's contention: The issue is the year of allowability, not the deductibility of interest itself, which is accepted). 3. Whether the Appellate Tribunal is right in law and on facts in directing the ITO to allow deduction towards guest house expenses for AYs 1979-80 to 1983-84? (Assessee's contention: Not recorded. Revenue's contention: Not recorded. Tribunal followed its own order and a High Court decision in CIT vs. Ahmedabad Mfg. And Calico Printing Co. Ltd.).

Which sections of the Income-tax Act were involved?

Section 256(1)

AI-generated summary — verify with the full judgment below

ITR/51/1994 1/25 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.51 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 ? ===================================================== BILESHWAR KHAND UDYOG SAHAKARI MANDLI LTD - Applicant(s) Versus COMMISSIONER OF INCOME-TAX - Respondent(s) ===================================================== Appearance : MR RK PATEL for MR MK PATEL for Applicant(s) : 1, MR BB NAIK for Respondent(s) : 1, ===================================================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 01/09/2005 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

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