THE COMMR. OF INCOME TAX (C) LDH. vs. M/S AGGARWAL STEEL ROLLING MILLS

ITR/38/1990HC Punjab & HaryanaPHHC01021588199008 January 2010Author: MR. JUSTICE HEMANT GUPTA,MR. JUSTICE JASBIR SINGH4 pages
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What did the High Court hold?

The High Court held that the refund of excise duty received by the assessee during the relevant assessment year would be taxable in that year. The Court referred to the Supreme Court's judgment in Polyflex (India) Pvt. Ltd. Vs. Commissioner of Income-Tax, which clarified that when an amount is obtained by way of refund in respect of a business expenditure for which an allowance or deduction was previously made, it falls under the clause "obtained any amount in respect of such expenditure" under Section 41(1) of the Act. The Court reasoned that the subsequent show cause notices disputing the refund do not amount to cessation or remission of a trading liability but rather represent a receipt on account of expenditure incurred earlier. Therefore, the mere fact that the refund was disputed through show cause notices did not render the income non-taxable in the year of receipt. The assessee would be entitled to claim the expenditure of such excise duty if it is found payable in pursuance of the show cause notices during the assessment year in which such liability is discharged. The reference was answered in favour of the Revenue and against the assessee.

What were the facts?

The assessee, M/s Aggarwal Steel Rolling Mills, received a refund of Rs. 26,782.22 from the Central Excise Department during the accounting period ending March 1, 1978, relevant to assessment year 1978-79. Although refund cheques were issued, the Central Excise Department issued show cause notices disputing the refunds. The assessee contended that since the refund issue was not final during the assessment year, it should not be included as taxable income under Section 41(1) of the Income Tax Act, 1961. The Income-Tax Appellate Tribunal (ITAT) had previously ruled in favour of the assessee, relying on its own decision in M/s Des Raj Chiranji Lal Steel Rolling Mills. The Revenue challenged this decision.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the amount of refunds received by the assessee from the Central Excise Department during the accounting period ended March 1, 1978, were not includible in the assessee's taxable income for the assessment year 1978-79, turning on Section 41(1) of the Income Tax Act, 1961? Assessee's contentions: The assessee argued that the refund issue had not attained finality during the relevant assessment year, and therefore, such an amount could not be included as taxable income under Section 41(1) of the Act. The assessee relied on the ITAT's decision in M/s Des Raj Chiranji Lal Steel Rolling Mills (I.T.A.No.428 of 1980 dated 24.2.1982). Revenue's contentions: The Revenue contended that the date of receipt of the refund is relevant for determining its inclusion in taxable income, even if it is disputed in separate proceedings. The Revenue relied on the judgment of the Hon'ble Supreme Court in Polyflex (India) Pvt. Ltd. Vs. Commissioner of Income-Tax (2002) 257 ITR 343.

Which sections of the Income-tax Act were involved?

Section 41(1),Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision : January 08, 2010 The Commissioner of Income-Tax (Central) Ludhiana ...Appellant Versus M/s Aggarwal Steel Rolling Mills, Mandi Gobindgarh ...Respondent CORAM:HON'BLE MR. JUSTICE JASBIR SINGH HON'BLE MR. JUSTICE HEMANT GUPTA Present: Ms. Urvashi Dhugga, Standing counsel, for the appellant.

Mr. Salil Bali, Advocate, for the respondent. HEMANT GUPTA, J.

The Income-Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, has referred under Section 256(1) of the Income Tax Act, 1961 (for short 'the Act'), the following question of law for the opinion of this Court : “Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the amount of refunds received by the assessee from the Central Excise Department during the accounting period ended 1.3.1978, were not includible in the assessee's taxable income for the assessment year 1978-79?”

The assessee received a sum of Rs.26,782.22, an account of refund of excise duty during the assessment year 1978-79. Though the cheques of refunds were issued, but the show cause not

The order continues below.

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