S I WORKS (QUARRY) PVT. LTD. vs. COMMISSIONER OF INCOME TAX

ITR/124/1986HC GujaratGJHC24010748198610 July 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA2 pages
AI SummaryDismissed

What were the facts?

The assessee, S I Works (Quarry) Pvt. Ltd., is challenging a disallowance of interest amounting to Rs. 14,148. The Assessing Officer disallowed 15% of the interest paid by the assessee-company to its shareholders and directors, invoking Section 40-A(8) of the Income Tax Act, 1961. The assessee's appeal before the CIT(Appeals) was dismissed, and a further appeal to the Income Tax Appellate Tribunal also resulted in dismissal. The matter was then referred to the High Court of Gujarat at Ahmedabad for its opinion on a substantial question of law.

What did the High Court hold?

The High Court of Gujarat held that the revenue was justified in disallowing 15% of the interest paid by the assessee-company to its directors and shareholders. The Court's reasoning was based on the law laid down by the same Court in the case of AGEW Steel Manufacturers Pvt. Ltd. v. Commissioner of Income Tax, 209 ITR 77. The principle established in this precedent likely supports the disallowance under Section 40-A(8) for interest paid to directors and shareholders. The Court answered the referred question in the affirmative, 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?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in disallowing interest of Rs. 14,148 under the provisions of Section 40-A(8) of the I.T. Act? Assessee's Contention: The assessee, through its learned advocate Shri Manish Shah, is seeking to overturn the Tribunal's decision. The specific arguments made by the assessee are not detailed in the judgment. Revenue's Contention: The revenue, represented by Shri Akil Kureshi, supports the disallowance made by the Assessing Officer and upheld by the lower appellate authorities. The revenue's arguments are not explicitly stated but are implied to be in line with the disallowance under Section 40-A(8).

Which sections of the Income-tax Act were involved?

Section 40-A(8),Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 124 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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