COMMISSIONER OF INCOME-TAX vs. ARUN MILLS LIMITED

ITR/23/1988HC GujaratGJHC24013100198805 December 2001Author: HONOURABLE MR. JUSTICE B.C.PATEL,HONOURABLE MR. JUSTICE D.A.MEHTA4 pages
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What were the facts?

The Income Tax Appellate Tribunal, Ahmedabad Bench 'A', referred four questions of law to the High Court of Gujarat at Ahmedabad under section 256(1) of the Income Tax Act, 1961. The Commissioner of Income-tax was the applicant, and Arun Mills Limited was the respondent. The respondent-assessee did not appear despite being served. The High Court noted that questions 1, 2, and 4 were concluded by different decisions, and question 3 was declined to be answered due to the small amount involved and uncertainty about its further appeal status. The judgment was delivered on December 5, 2001.

What did the High Court hold?

The High Court answered the questions as follows: Question 1: The medical benefits paid to the Managing Director are to be considered for disallowance under section 40(c). This part of the question was decided against the assessee, following the High Court's decision in CIT vs. Ambica Mills Ltd. (236 ITR 921). However, the House Rent Allowance paid to the Managing Director is not to be considered for disallowance under section 40(c), following the Supreme Court's decision in CIT vs. Mafatlal Gangabhai & Co. (P) Ltd. (219 ITR 644). Question 2: Cash payments of house rent allowance and special duty allowance to officers are not to be considered for disallowance under section 40A(5), as cash payments to employees do not fall within the ambit of section 40(a)(v) or section 40A(5)(a)(ii), as stated by the Apex Court. Question 4: All tours undertaken by an employee during the year are not to be grouped together. The limits laid down in Rule 6D of the Income Tax Rules, 1962, are to be applied with reference to each trip of an individual employee. This was decided in line with the High Court's decision in CIT vs. Nutan Mills Ltd. (ITR No. 54 of 1988, decided on 06/02/2001). Question 3: The Court declined to answer this question as the amount involved was Rs. 4,750/-, and the applicant-revenue could not ascertain if the Tribunal's decision had been carried further or accepted. The reference was disposed of accordingly.

What were the issues?

The Tribunal had to decide four questions of law: 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that while considering the disallowance u/s.40(c), the medical benefits and house rent allowance paid to the managing directors is not to be considered? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that cash payment of house rent allowance and special duty allowance to the officers of the company is not to be considered for the purpose of disallowance u/s.40-A(5) of the Act? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that deduction u/s.80VV should be allowed on the total income computed for the purpose of sec.80VVA irrespective of the fact that the total income computed without applying the provisions of Sec.80VVA is nil? 4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that while disallowing travelling expenses under the rule 6D of the I.T.Rules, all the tours undertaken by a person during the year should first be grouped and then limits laid down in rule 6D should be applied? Arguments: Assessee: Not recorded as they did not appear. Revenue: Relied on the decisions of the High Court and Supreme Court for questions 1, 2, and 4. For question 3, the revenue's counsel could not ascertain the appeal status of a prior Tribunal decision and the amount was small.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 40(c),Section 40-A(5),Section 80VV,Section 80VVA,Section 40(a)(v),Section 6D

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 23 of 1988

For Approval and Signature:

Hon'ble MR.JUSTICE B.C.PATEL 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 Civil Judge? : NO

The order continues below.

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