COMMISSIONER OF INCOME-TAX vs. MATURDAS GOVINDDAS (HUF)

ITR/71/1989HC GujaratGJHC24012852198904 October 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
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What did the High Court hold?

The High Court held that the Tribunal was not right in deleting the addition made by disallowing the interest payment to M/s. Laxmi Vijay Mills and Harivallabhdas Mulchand. The Court followed its own decision in CIT vs. Krishnadas Govinddas, Income-tax Reference No. 133 of 1984 dated 5.2.1999, wherein it was held that the interest paid to these two firms could not be treated as business expenditure. Therefore, both questions referred to the Court in both references were answered in the affirmative, in favour of the Revenue and against the assessee. The operative direction was to answer the questions in favour of the Revenue.

What were the facts?

The Commissioner of Income-tax (Revenue) has filed two references before the High Court of Gujarat at Ahmedabad. Income-tax Reference No. 71 of 1989 pertains to assessment year 1970-71, and Income-tax Reference No. 73 of 1989 covers assessment years 1966-67, 1967-68, 1968-69, 1969-70, and 1971-72. The assessee, M/s. Msturdas Govinddas (HUF), claimed deduction for interest payments made to M/s. Laxmi Vijay Mills and Harivallabhdas Mulchand as business expenditure. The Income-tax Officer disallowed this claim. However, the Appellate Assistant Commissioner allowed the claim, following a decision in the case of the assessee's brother. The Income-tax Appellate Tribunal (ITAT) upheld the Appellate Assistant Commissioner's order, leading to these references by the Revenue.

What were the issues?

The Tribunal had to decide the following questions of law: 1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has erred in law in deleting the addition on account of interest payments to M/s. Laxmi Vijay Mills and Harivallabhdas Mulchand? 2. Whether the finding of the Appellate Tribunal that the assessee is entitled to the allowance of interest payments to M/s. Laxmi Vijay Mills and Harivallabhdas Mulchand as claimed, is correct in law and sustainable from the material on record? The Revenue contended that the interest paid to the two firms could not be treated as business expenditure. The judgment does not record specific arguments from the assessee, other than noting that notice was served. The Revenue relied on the decision of this Court in CIT vs. Krishnadas Govinddas, Income-tax Reference No. 133 of 1984 dated 5.2.1999.

Which sections of the Income-tax Act were involved?

Section 256(2)

AI-generated summary — verify with the full judgment below

)) IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 71 of 1989 and INCOME TAX REFERENCE No 73 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?

The order continues below.

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