COMMISSIONER OF INCOME-TAX vs. MAHAVIR BUILDERS

ITR/182/1988HC GujaratGJHC24013258198830 October 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the revenue's grievance that the CIT (Appeals) and the Tribunal overlooked the fact that payments were made to Shri Jayantilal Patel as a representative of Govindbhai C. Patel Family Trust (a partner firm) was not a point raised before the Tribunal or proposed for reference. The Court noted that the revenue itself proceeded on the footing that the commission payments were made to Shri Jayantibhai Patel as trustee and representative of Smt. Kailashben Jayantilal Family Trust, which was admittedly not a partner in the assessee firm. Therefore, the question referred by the Tribunal, which was also proposed by the revenue, was the only question to be answered. The Court answered this question in the affirmative, in favour of the assessee and against the revenue. The reference was disposed of accordingly.

What were the facts?

The Income Tax Officer (ITO) disallowed commission payments of Rs. 20,560 for assessment year 1979-80 and Rs. 14,536 for assessment year 1980-81 to Shri Jayantilal Chhababhai Patel under Section 40(b) of the Income Tax Act, 1961. The ITO noted that Shri Jayantilal was a trustee of Smt. Kailashben Jayantilal Family Trust and a representative of Shri Govindbhai C. Patel Family Trust, which was a partner in the assessee firm. The ITO also questioned the actual performance of services for which commission was paid. The CIT (Appeals) and the Income-tax Appellate Tribunal (Tribunal) held that since Smt. Kailashben Jayantilal Family Trust was not a partner in the assessee firm, the disallowance under Section 40(b) was incorrect. The revenue has filed a reference application to the High Court.

What were the issues?

1. Whether the Tribunal was right in law in holding that since Smt. Kailashben Family Trust was not a partner in the assessee firm, the payments of commission to Shri Jayantilal Chhababhai Patel in the capacity as trustee of the said trust could not be disallowed u/s. 40(b) of the I.T. Act, 1961? Assessee's Contention: Not recorded. Revenue's Contention: The revenue argued that the Assessing Officer had disallowed the payment of commission to Shri Jayantibhai Patel because the payments were made to him in his capacity as a trustee and representative of Govindbhai C. Patel Family Trust, which was a partner in the assessee firm. The revenue contended that this significant fact was overlooked by the CIT (Appeals) and the Tribunal. The revenue relied on the fact that the question referred to the High Court was proposed by the revenue itself.

Which sections of the Income-tax Act were involved?

Section 40(b),Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 182 of 1988

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH 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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