COMMISSIONER OF INCOME TAX vs. ASHOKA MILLS LTD

ITR/161/1986HC GujaratGJHC24010785198617 July 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA4 pages
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What were the facts?

This case involves an Income Tax Reference made by the revenue to the High Court of Gujarat at Ahmedabad at the instance of the Commissioner of Income Tax. The reference concerns an appeal filed by Ashoka Mills Ltd. against an order of the Income Tax Appellate Tribunal, Ahmedabad Bench 'B'. The questions referred relate to the deletion of additions made by the Assessing Officer concerning medical benefits and personal accident insurance premium for the Managing Director, the disallowance of payment for the use of a trademark, the allowance of expenditure for issuing bonus shares, and the allowance of a contribution to a charitable trust. The revenue was represented, but the assessee did not appear.

What did the High Court hold?

The High Court answered the questions as follows: 1. & 2. For medical benefits to the Managing Director, the expenditure is subject to the ceiling under Section 40(c), as held in Gujarat Steel Tubes Ltd. v. CIT. Thus, the question is answered in the negative, against the assessee and in favour of the revenue. For the personal accident insurance premium of the Managing Director, the expenditure is not subject to the ceiling under Section 40(c), as decided in CIT v. Ambica Mills Ltd. Thus, this question is answered in the affirmative, in favour of the assessee and against the revenue. 3. For the payment made to Mettur Beardsell for the use of the trademark "Tabilised", the court followed its earlier decision in CIT v. Ashoka Mills Ltd. and answered the question in the affirmative, in favour of the assessee and against the revenue. 4. For the expenditure incurred in connection with the issue of bonus shares, the court followed its decision in Gujarat Steel Tubes (supra) and answered the question in the negative, against the assessee and in favour of the revenue. 5. The court declined to answer the question regarding the contribution to CKNL Charitable Trust due to a lack of relevant material, as the revenue's advocate could not confirm the final decision in the case relied upon by the lower authorities. The reference was disposed of without any order as to costs.

What were the issues?

The Tribunal had to decide five questions of law referred by the revenue: 1. Whether the Tribunal was right in confirming the deletion of additions made on account of (i) expenditure of medical benefits and (ii) personal accident insurance premium of the Managing Director. 2. Whether the expenditure on medical benefits and personal accident insurance premium of the Managing Director should be considered for disallowance under Section 40(c) of the Income-tax Act, 1961. 3. Whether the Tribunal was right in confirming the deletion of disallowance for payment made to Mettur Beardsell for the use of the trademark "Tabilised". 4. Whether the Tribunal was right in holding that the assessee is entitled to the allowance of expenditure incurred in connection with the issue of bonus shares. 5. Whether the Tribunal was right in confirming the deletion of disallowance for a contribution of Rs. 1,50,000/- to CKNL Charitable Trust as revenue expenditure. Assessee's contentions were not recorded as they did not appear. The revenue argued that the first two questions involved similar legal issues and had been answered by the court in previous cases. For the third question, the revenue referred to a previous decision of the court in CIT v. Ashoka Mills Ltd. For the fourth question, the revenue relied on the decision in Gujarat Steel Tubes Ltd. v. CIT. For the fifth question, the revenue stated that the Assessing Officer, CIT, and Tribunal had relied on earlier orders, but could not confirm if a final decision had been taken in the relied-upon case.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 40(c)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 161 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 : 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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