DINESH MILLS LTD vs. COMMISSIONER OF INCOME-TAX

ITR/20/1988HC GujaratGJHC24013098198824 October 2002Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
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What were the facts?

This is an Income Tax Reference before the High Court of Gujarat at Ahmedabad, arising from an order of the Income Tax Appellate Tribunal, Ahmedabad Bench "B". The reference was made at the instance of the assessee, Dinesh Mills Ltd., and the revenue. The assessee is challenging the Tribunal's decision on two questions. The revenue also presented two questions for the Court's opinion. The Court was asked to decide these questions based on the facts and circumstances of the case. The parties submitted that the questions referred had already been settled by previous judgments of the High Court or the Apex Court.

What did the High Court hold?

The High Court answered the questions as follows. Regarding the first question, concerning commission paid to the Managing Director as a perquisite under Section 40(c), the Court, following the decision in Commissioner of Income Tax vs. Rohit Mills Ltd. (219 ITR 228), answered the question in the affirmative, meaning it was against the assessee and in favour of the revenue. For the second question, regarding the allowability of legal and professional expenses of Rs. 22,518/- for amalgamation, the Court, relying on the Apex Court's decision in Commissioner of Income Tax vs. Bombay Dyeing and Manufacturing Co.Ltd. (219 ITR 521), answered the question in favour of the assessee, holding that these expenses are allowable as revenue expenditure. For the questions referred at the instance of the revenue concerning motorcar expenses and depreciation, the Court, citing the decision in Sayaji Iron and Engg.Co. Vs. Commissioner of Income Tax (253 ITR 749), decided these questions in favour of the assessee and against the revenue. The reference was disposed of accordingly.

What were the issues?

The High Court was asked to decide the following questions: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in considering the commission paid to the Managing Director as a perquisite for the purpose of Section 40(c) of the Income Tax Act, 1961? The assessee argued that the Tribunal's decision on this point was against the law. The revenue contended that the Tribunal was correct. 2. Whether, on the facts and in the circumstances of the case, legal and professional expenses of Rs. 22,518/- in respect of the amalgamation of a sister concern with the assessee company is allowable as revenue expenditure or capital expenditure? The assessee argued for its allowability as revenue expenditure. The revenue likely contended it was capital in nature. Additionally, the Court considered questions referred at the instance of the revenue: 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal has not erred in law in holding that a sum of Rs. 20,000/- out of motorcar expenses is not disallowable as personal and non-business use of the motorcar in the hands of the assessee? 4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the assessee is entitled to the depreciation as claimed and 1/7th portion of the depreciation of the motorcar is not disallowable? The revenue argued that the Tribunal erred in its findings on these points. The assessee contended that these questions should be decided in its favour.

Which sections of the Income-tax Act were involved?

Section 40(c),Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 20 of 1988

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 concerned : NO Magistrate/Magistrates,Judge/Judge

The order continues below.

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