C I T vs. M/S PORRITTS AND SPENCER LTD.

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ITA/45/2009HC Punjab & HaryanaPHHC01084558200930 July 2009Author: MR. JUSTICE ADARSH KUMAR GOEL,MRS JUSTICE DAYA CHAUDHARY3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the questions proposed by the Revenue were not substantial questions of law. The Court noted the assessee's submission that an identical issue in a previous appeal (ITA No.540 of 2006) concerning the same assessee had already been dismissed by the High Court on 5.3.2009. Furthermore, with respect to the second issue concerning staff welfare expenses, the Court referred to the Supreme Court's decision in Shahzada Nand & Sons v. CIT (1977) 108 ITR 358. This precedent lays down that the concept of business expediency must be viewed in the context of current socio-economic thinking, recognizing that businesses are a product of combined efforts of employers and employees, and a liberal approach should be adopted towards allowing expenses for employee welfare. Based on these grounds, the High Court found itself unable to consider the proposed questions as substantial questions of law. Consequently, the appeal filed by the Revenue was dismissed. No issue was expressly left undecided.

What were the facts?

The Revenue, Commissioner of Income Tax, Faridabad, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 6.7.2007 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench 'B'. The ITAT had confirmed the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which deleted disallowances made by the Assessing Officer (AO). The disallowances pertained to Rs. 4,35,000 on account of commission paid to the Managing Director and Executives, and Rs. 11,17,288 for staff welfare expenses deemed non-verifiable and personal. The assessment year in question was 2001-02. The High Court heard the appeal after condoning a delay.

What were the issues?

The Tribunal had to decide two substantial questions of law proposed by the Revenue: 1. Whether the Hon'ble ITAT erred in law in confirming the order of the CIT(A) which deleted the disallowance of Rs. 4,35,000 made by the AO on account of commission paid to the Managing Director and Executives? 2. Whether the Hon'ble ITAT erred in law in confirming the order of the CIT(A) which deleted the disallowance of Rs. 11,17,288 made by the AO being non-verifiable and personal in nature out of staff welfare expenses? Assessee's Contentions: - The assessee's counsel pointed out that an identical issue in ITA No.540 of 2006 concerning the assessee had been dismissed by the High Court on 5.3.2009. - Regarding the second question, the assessee noted that for an earlier assessment year, the Revenue had filed ITA No.362 of 2005 but did not raise such a question. - The assessee argued that the second question could not be considered a substantial question of law in light of the Supreme Court's judgment in Shahzada Nand & Sons v. CIT (1977) 108 ITR 358, which emphasizes considering business expediency and a liberal approach to employee welfare expenses. Revenue's Contentions: - The judgment records no specific contentions made by the Revenue's counsel on the merits of the proposed substantial questions of law.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No.45 of 2009(O&M) Date of decision: 30.7.2009 Commissioner of Income Tax, Faridabad -----Appellant Vs. M/s Porrits & Spencers (Asia) Limited, Faridabad. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:- Mr. Rajesh Katoch, Standing Counsel for the revenue. Mr. Santosh Aggarwal and Mr. A.C.Jain, Advocates for the respondent-assessee. Adarsh Kumar Goel,J.

1.

Notice was issued on condonation of delay.

2.

Delay condoned. Heard on merits.

4.

This appeal has been preferred by the revenue under section 260-A of the Income Tax Act, 1961 (in short, ‘the Act’) against the order dated 6.7.2007 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘B’ New Delhi in ITA No.5230/(DEL)/2004 for the assessment year 2001-02, proposing to raise following substantial questions of law:- “Whether the Hon’ble ITAT has erred in law in confirming the order of the CIT(A) vide which the disallowance of Rs.4,35,000/- made by the Assessing Officer on account of commission paid to Managing Director and the Executives, was deleted? ii) Whether the Hon’ble ITAT has erred in law in confirming the order of the CIT(A) in which the disallowance of Rs.11,17,288/- made by the Assessing Officer being non verifiable and personal in nature out of staff welfare expenses, was deleted?”

5.

The Assessing Officer disallowed deduction claimed on account of commission paid to Managing Director and Executives and expenditure out of staff welfare which was not verifiable and was personal in nature. On appeal, the claim of the assessee was upheld by the CIT(A) as well as the Tribunal.

6.

The Tribunal followed its earlier order in the case of the assessee.

7.

We have heard learned counsel for the parties.

8.

Learned counsel for the assessee points out that ITA No.540 of 2006 raising an identical issue in the case of the assessee has been dismissed on 5.3.2009. He further points out that with regard to Question No.(ii), ITA No.362 of 2005 was filed by the revenue in the earlier assessment year but no such question was raised. Even otherwise, the said question cannot be held to be substantial question of law in view of judgment of the Hon’ble Supreme Court in Shahzada Nand & Sons v. CIT, (1977) 108 ITR 358, laying down that the concept of business expediency had to be considered in the context of current socio economic thinking that the business is product of combined efforts of the employer and employees and liberal approach has to be adopted to allow expenses for welfare of employees.

9.

In view of above, we are unable to hold that the questions proposed are substantial questions of law.

10.

The appeal is dismissed. (Adarsh Kumar Goel) Judge July 30, 2009 (Daya Chaudhary) ‘gs’ Judge 3

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