ROHIT MILLS LTD. vs. COMMISSIONER OF INCOME TAX

ITR/269/1987HC GujaratGJHC24012001198704 December 2002Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE K.M.MEHTA4 pages
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What were the facts?

This case involves an Income Tax Reference before the High Court of Gujarat at Ahmedabad, arising from a decision of the Income Tax Appellate Tribunal, Ahmedabad Bench 'A'. The reference was made at the instance of both the revenue and the assessee, Rohit Mills Ltd., concerning several questions of law. The assessment years are not explicitly stated. The core of the dispute revolves around the computation of disallowances under Section 40(c) of the Income-tax Act, 1961, the eligibility of certain expenses for weighted deduction under Section 35B, and the valuation of shares. The procedural history involves the Tribunal referring these questions to the High Court under Section 256(1) of the Act for its opinion.

What did the High Court hold?

The High Court addressed each referred question. For Revenue's Question 1, concerning medical expenses and Section 40(c), the Court held in the negative, against the assessee, following the decision in Ambica Mills Ltd. v. CIT, 235 ITR 264. For Revenue's Question 2, regarding contribution to an export promotion fund and Section 35B, the Court held in the negative, against the assessee, citing Wintex Ltd. v. CIT, 104 CTR 232. For Revenue's Question 3, concerning the valuation of shares of Sayaji Mills Ltd. and the fall in value of shares of Rajesh Textile Mills Ltd., the Court held in the affirmative, in favour of the assessee, relying on CIT v. Suhas Vadilal, 239 ITR 362. For Revenue's Question 4, regarding premium for personal accident insurance policies and Section 40(c), the Court held in the affirmative, in favour of the assessee, based on CIT v. Cama Motors Pvt. Ltd., 234 ITR 699. Finally, for the Assessee's Question, concerning commission paid to Directors and Section 40(c) disallowance, the Court held in the affirmative, against the assessee, referencing the assessee's own earlier year's case reported in 129 ITR 228. The reference was disposed of with no order as to costs.

What were the issues?

The High Court was asked to decide the following questions: 1. **Revenue's Question 1:** Whether, in law and on facts, reimbursement of medical expenses is required to be excluded while computing disallowance under Section 40(c) of the Income-tax Act, 1961? * **Assessee's Contention:** Not recorded. * **Revenue's Contention:** Not recorded. 2. **Revenue's Question 2:** Whether, in law and on facts, the contribution to an export promotion fund of the Indian Cotton Mills Federation is exigible to weighted deduction under Section 35B of the I.T. Act, 1961? * **Assessee's Contention:** Not recorded. * **Revenue's Contention:** Not recorded. 3. **Revenue's Question 3:** Whether, in law and on facts, while considering the sale consideration of shares of Rajesh Textile Mills Ltd., the fall in the value of shares of Sayaji Mills Ltd., has to be taken into account? * **Assessee's Contention:** Not recorded. * **Revenue's Contention:** Not recorded. 4. **Revenue's Question 4:** Whether, in law and on facts, premium paid for personal accident insurance policies is required to be excluded while computing disallowance under Section 40(c) of the Income-tax Act, 1961? * **Assessee's Contention:** Not recorded. * **Revenue's Contention:** Not recorded. 5. **Assessee's Question:** Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the commission paid by the appellant to the Directors of the company should be included in the remuneration for the purposes of determining the disallowance u/s 40(c) of the Act? * **Assessee's Contention:** Commission paid to Directors should not be included in remuneration for Section 40(c) disallowance. Relied on the assessee's own earlier year's case reported in 129 ITR 228. * **Revenue's Contention:** Not recorded.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 40(c),Section 35B

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 269 of 1987

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE K.M.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 concerned : NO Magi

The order continues below.

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