G. K. CHOKSI & CO. (C.A.) vs. COMMISSIONER OF INCOME-TAX

ITR/194/1986HC GujaratGJHC24010818198616 August 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA14 pages
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What did the High Court hold?

The High Court held that the Tribunal was right in law in holding that the assessee was not entitled to deduction under Section 32(1)(iv) of the Act. The Court reasoned that while the opening of Section 32(1) mentions 'business or profession', specific clauses within it can be restricted. Clause (iv) explicitly uses the term 'business' and not 'profession'. The Court found no warrant to extend the meaning of 'business' in Section 32(1)(iv) to include 'profession', especially when 'profession' is separately defined. The Court distinguished the Barendra Prasad Ray case as being fact-specific and not applicable here. It also stated that a strict literal interpretation of Section 32(1)(iv) does not lead to an absurd or unjust result, and it is not open to the Court to modify the language of the statute. The Court concluded that the legislature has consciously classified assessees, and the classification in Section 32(1)(iv) is not arbitrary. The question referred to the Court was answered in the affirmative, in favour of the revenue.

What were the facts?

The assessee, a firm of Chartered Accountants, claimed initial depreciation under Section 32(1)(iv) of the Income Tax Act, 1961, on a building erected at Petlad for the assessment year 1984-85. The Income Tax Officer disallowed the claim, holding that Section 32(1)(iv) applied only to businesses, not professions. The CIT(Appeals) allowed the claim, relying on the Supreme Court decision in Barendra Prasad Ray. The revenue appealed to the Tribunal, which reversed the CIT(Appeals)'s decision, holding that the assessee was not entitled to the deduction. The Tribunal's order was then referred to the High Court.

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 the assessee, carrying on a profession, was not entitled to deduction under Section 32(1)(iv) of the Income Tax Act, 1961? Assessee's Contentions: - The opening portion of Section 32(1) uses "business or profession," implying that sub-clause (iv) should also apply to professions. - Definitions of 'business' and 'profession' in Sections 2(13) and 2(36) are inclusive, and the introductory phrase "unless the context otherwise requires" allows for interchangeable interpretation. - CBDT Circular No. 202 dated 5/7/1976 used the term 'Tax Payer', indicating legislative intent to include professions. - C.I.T. vs. J.H. Gotla and C.I.T. vs. J.K. Hosiery Factory support interpreting statutes to avoid unjust results and favour the assessee. Revenue's Contentions: - Definitions of 'business' and 'profession' must be given independent meanings, and 'business' should exclude 'profession' given separate definitions. - Various clauses of Section 32 indicate that some apply to both business and profession, while others are specific to 'business'. Clause (iv) specifically uses the word 'business'. - The Supreme Court decision in Barendra Prasad Ray was based on peculiar facts and not universally applicable. - A strict literal interpretation of Section 32(1)(iv) does not lead to an absurd or unjust result.

Which sections of the Income-tax Act were involved?

Section 32(1)(iv),Section 2(13),Section 2(36),Section 9(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 194 of 1986

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements?

2.

To be referred to the Reporter or not? : YES

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO ----------------

The order continues below.

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