COMMISSIONER OF INCOME TAX vs. AHMEDABAD NEW COTTON MILLS CO LTD

ITR/283/1987HC GujaratGJHC24012015198719 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 Commissioner of Income Tax (Revenue) against Ahmedabad New Cotton Mills Co Ltd (Assessee) before the High Court of Gujarat. The reference was made at the instance of the revenue, seeking the court's opinion on two questions referred by the Income Tax Appellate Tribunal, Ahmedabad bench 'A'. The assessee was served notice, but no one appeared on their behalf. The court noted that both questions had been answered by different courts during the pendency of the reference, influencing its decision. The reference was disposed of on August 1, 2001, with no order as to costs.

What did the High Court hold?

The High Court addressed each question based on existing judicial pronouncements. For the first question, concerning disallowance under Section 40(c), the court held that medical benefits paid to Managing Directors are to be considered, citing Gujarat Steel Tubes Ltd. v. Commissioner of Income Tax (210 I.T.R. 358). This part of the question was answered in favour of the revenue. However, regarding House Rent Allowance paid to Managing Directors, the court followed the Supreme Court's decision in Commissioner of Income Tax v. Mafatlal Gangabhai and Co. (P.) Ltd. (219 I.T.R. 644), which held that HRA is not to be taken into account for disallowance under Section 40(c). This portion was answered in favour of the assessee. For the second question, concerning travelling expenses under Rule 6D, the court, referencing its own decision in Income Tax Reference No. 54/88, held that tours are not to be grouped together. Instead, the limits under Rule 6D should be applied to each trip of an individual employee. This question was answered in favour of the revenue. The reference was disposed of accordingly.

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 and House Rent Allowance paid to the Managing Directors are not to be considered? - Assessee's contention: Not recorded. - Revenue's contention: Not recorded. 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 contention: Not recorded. - Revenue's contention: Not recorded.

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 283 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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