COMMISSIONER OF INCOME TAX vs. DEVARSONS PVT.LTD.

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ITR/139/1989HC GujaratGJHC24012919198916 October 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the export cash assistance received by the assessee during the assessment year 1983-84 was taxable as income and not exempt as a capital receipt. The Court reasoned that the Legislature had amended Sections 2(24) and 28(iiib) of the Income Tax Act retrospectively. These amendments specifically included cash assistance received against export under any Government of India scheme within the definition of 'income' and made it chargeable to tax under the head 'Profits and gains of business or profession'. The Court noted that this legislative action was intended to overcome the effect of decisions like the one in Gadore Tools (India) (P) Ltd. vs. IAC. Therefore, despite the Tribunal's earlier finding, the retrospective amendment mandated that such assistance was taxable. The Court answered the referred question in the negative, in favour of the Revenue and against the Assessee. The reference was disposed of with no order as to costs.

What were the facts?

This case involves an Income Tax Reference filed by the Commissioner of Income Tax (Revenue) against Devarsons Pvt. Ltd. (Assessee) for the assessment year 1983-84. The reference application had been pending for approximately 12 years. The core issue was whether export cash assistance received by the assessee was taxable or exempt as a capital receipt. The Tribunal had previously held it to be a capital receipt, relying on the decision in Gadore Tools (India) (P) Ltd. vs. IAC. However, the Revenue pointed out a retrospective legislative amendment to Sections 2(24) and 28(iiib) of the Income Tax Act, which declared such cash assistance as income chargeable under the head 'Profits and gains of business or profession'. The High Court agreed to hear the reference for final disposal due to the legislative amendment.

What were the issues?

1. Whether, in law and on facts, the Tribunal is right in holding that export cash assistance received by the assessee company during the year was not taxable and was exempt as capital receipt? Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, the Tribunal's earlier decision, which the assessee would have supported, held the export cash assistance to be a capital receipt, exempt from tax. This decision was based on the precedent of Gadore Tools (India) (P) Ltd. vs. IAC, 25 ITD 193. Revenue's Contention: The Revenue contended that a retrospective legislative amendment to Sections 2(24) and 28(iiib) of the Income Tax Act made export cash assistance, by whatever name called, received under any Government of India scheme, chargeable to income-tax under the head 'Profits and gains of business or profession'. This amendment, effective from 1-4-1967, rendered the Tribunal's earlier decision incorrect for the assessment year 1983-84.

Which sections of the Income-tax Act were involved?

Section 2(24),Section 28(iiib)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 139 of 1989

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 -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus DEVARSONS PVT.LTD. -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 139 of 1989 MR BB NAIK with MR MANISH R BHATT for Petitioner No. 1 MR RK PATEL for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE D.A.MEHTA

Date of decision: 16/10/2001

ORAL JUDGEMENT

(Per : MR.JUSTICE M.S.SHAH) Mr BB Naik learned counsel for the revenue makes a specific request that since this reference is pending for last about 12 years and more particularly, since the controversy raised in this reference is concluded by a retrospective legislative amendment, this Bench may take up this reference for final disposal, notwithstanding the fact that one of us (Shri D.A. Mehta,J) had appeared for the respondent-assessee at the hearing of the reference application before the Income Tax Appellate Tribunal.

In view of the above request, we take up this reference for final disposal.

2.

In this reference at the instance of the revenue, the following question is referred for our opinion in respect of assessment year 1983-84:-

"Whether, in law and on facts, the Tribunal is right in holding that export cash assistance received by the assessee company during the year was not taxable and was exempt as capital receipt?"

3.

We have heard Mr BB Naik learned counsel for the chargeable to income-tax under the head "Profits and gains of business or profession" and that such assistance shall be included in "income". The aforesaid legislative amendment was made w.e.f. 1-4-1967. The year under consideration is the assessment year 1983-84. Hence, in view of the aforesaid legislative amendment with retrospective effect, export cash assistance received by the assessee during the year under consideration was taxable as income and was not exempt as capital receipt.

Accordingly, our answer to the question is in the negative i.e. in favour of the revenue and against the assessee.

5.

The Reference accordingly stands disposed of with no order as to costs.

(M.S. Shah,J)

(D.A. Mehta,J)

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