COMMISSIONER OF INCOME TAX vs. CIBATUL LTD

ITR/291/1987HC GujaratGJHC24012021198719 July 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
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What were the facts?

This case involves an Income Tax Reference filed by the revenue against Cibatul Ltd. The reference was made at the instance of the revenue to the High Court of Gujarat at Ahmedabad, seeking the court's opinion on two questions referred by the Income Tax Appellate Tribunal, Ahmedabad bench 'A'. The questions pertained to the interpretation and application of provisions of the Income Tax Act, 1961, and Income Tax Rules. The reference was heard by a division bench of the High Court. During the pendency of the reference, both questions were answered by the High Court.

What did the High Court hold?

The High Court answered both questions referred by the revenue. For the first question concerning disallowance under Section 40(c) and medical benefits paid to managing directors, the Court relied on its prior decision in Ambica Mills Ltd. v. Commissioner of Income Tax (235 ITR 264). It held that medical benefits given to the managing director are indeed to be taken into account when considering disallowance under Section 40(c). Therefore, the first question was answered in the affirmative, against the assessee and in favour of the revenue. For the second question regarding travelling expenses under Rule 6D, the Court referred to its judgment in Income Tax Reference No. 54/88. It held that all tours undertaken by an employee are not to be grouped together for the purpose of disallowance under Rule 6D. Instead, the limits prescribed in Rule 6D are to be applied with reference to each individual trip of the employee. Consequently, the second question was answered in the negative, in favour of the revenue and against the assessee. The reference was disposed of accordingly with no order as to costs.

What were the issues?

The Tribunal had to decide two questions referred by the revenue: 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that while considering the disallowance under Section 40(c), the medical benefits paid to the managing directors are to be considered? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that while disallowing travelling expenses under Rule 6D of the I.T. Rules, all the tours undertaken by a person during the year should first be grouped and then the limits laid down in Rule 6D should be applied? Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The revenue, by referring these questions, implicitly contended that the Tribunal's findings on these issues were incorrect. The revenue relied on the High Court's own previous decisions in Ambica Mills Ltd. v. Commissioner of Income Tax and Income Tax Reference No. 54/88 to support its position.

Which sections of the Income-tax Act were involved?

Section 40(c),Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 291 of 1987

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 : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 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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