COMMISSIONER OF INCOME-TAX vs. ROHIT MILLS LTD.

ITR/201/1989HC GujaratGJHC24012981198909 April 2003Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE K.M.MEHTA3 pages
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What were the facts?

This case involves an Income Tax Reference before the High Court of Gujarat at Ahmedabad. The Income Tax Appellate Tribunal, Ahmedabad Bench 'B', had referred three questions for the High Court's consideration. Questions 1 and 3 were previously referred under Section 256(1) of the Income Tax Act, 1961, and were the subject of an earlier High Court decision in CIT v. Rohit Mills (236 ITR 436). The present reference was made to include Question 2, which pertains to the assessee's claim for deduction under Section 35B for an amount paid to the Indian Cotton Mills Federation. The Tribunal had allowed this claim, relying on CIT v. Piramal Spinning & Weaving Mills Ltd. (124 ITR 408).

What did the High Court hold?

The High Court held that Questions 1 and 3, having been previously decided by a Division Bench in CIT v. Rohit Mills (236 ITR 436), did not require further consideration. Regarding Question 2, the High Court noted that the Tribunal had allowed the assessee's claim for Rs.2,40,977 paid to the Indian Cotton Mills Federation under Section 35B, citing CIT v. Piramal Spinning & Weaving Mills Ltd. (124 ITR 408). However, the High Court found this reliance misplaced. The Supreme Court, in CIT v. Hero Cycles Pvt. Ltd. (228 ITR 463), had held that contributions to the Indian Cotton Mills Federation did not fall within the scope of Section 35B(1)(b), as such contributions to a general body or chamber of commerce do not qualify for weighted deduction, even if they are for the promotion of exports generally. Therefore, the High Court concluded that the Tribunal had erred in allowing the claim. Question 2 was answered in the negative, in favour of the Revenue and against the assessee.

What were the issues?

The High Court was asked to decide three questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the claim of the assessee for deduction of Rs.12,605 being bank guarantee commission as revenue expenditure? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the claim of the assessee in full under Section 35B for Rs.2,40,977 paid to the Indian Cotton Mills Federation? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs.5,43,500 from the assessment of the assessee? Contentions: Assessee: The assessee claimed deduction for bank guarantee commission as revenue expenditure (Question 1), claimed deduction under Section 35B for payment to Indian Cotton Mills Federation (Question 2), and sought deletion of an addition to its assessment (Question 3). The Tribunal had allowed these claims. Revenue: The Revenue challenged the Tribunal's decisions on all three questions. The High Court noted that Questions 1 and 3 were already decided in a previous reference (CIT v. Rohit Mills, 236 ITR 436) and did not need to be reconsidered. The focus of the current reference was Question 2.

Which sections of the Income-tax Act were involved?

Section 35B,Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 201 of 1989

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and Hon'ble MR.JUSTICE K.M.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : YES 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 concerned : NO

The order continues below.

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