COMMISSIONER OF INCOME TAX vs. SARABHAI CHEMICALS PVT.LTD.

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ITR/12/1988HC GujaratGJHC24013090198828 June 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA2 pages
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What did the High Court hold?

The High Court held that the Appellate Tribunal was right in law in deleting the amount of Rs. 2.80 lakhs in respect of the taxability of goodwill. The Court's reasoning was based on the judgment previously delivered by the same High Court in I.T.R. No. 243 of 1985 and I.T.R. No. 243A/85 dated 8/3/2001, in the case of Commissioner of Income Tax vs. Shahibaug Enterprenuers Pvt. Ltd. The Tribunal had relied on this precedent. Therefore, the High Court answered the question in the affirmative, in favour of the assessee and against the Revenue. The operative direction was to dispose of the reference accordingly.

What were the facts?

The Commissioner of Income Tax (Revenue) has referred a question of law to the High Court of Gujarat at Ahmedabad concerning an Income Tax Reference No. 12 of 1988. The Income Tax Appellate Tribunal, Ahmedabad Bench 'C', had deleted an amount of Rs. 2.80 lakhs from the taxable income of Sarabhai Chemicals Pvt. Ltd. (assessee) concerning the taxability of goodwill. The Tribunal's decision was based on a prior order of the High Court in the case of Commissioner of Income Tax vs. Shahibaug Enterprenuers Pvt. Ltd. The Revenue is challenging the Tribunal's deletion of this amount.

What were the issues?

1. Whether the Appellate Tribunal is right in law in deleting an amount of Rs. 2.80 lakhs in respect of the taxability of goodwill? (Question of law turning on the interpretation of provisions related to the taxability of goodwill). Assessee's Contention: The assessee, through its counsel, implicitly supports the Tribunal's decision by not arguing against it. The judgment does not record specific arguments made by the assessee's counsel other than drawing attention to the relevant High Court judgment. Revenue's Contention: The Revenue, through its counsel, has referred the question to the High Court, indicating disagreement with the Tribunal's deletion of Rs. 2.80 lakhs. The Revenue's argument is that the Tribunal was not right in law in making this deletion.

Which sections of the Income-tax Act were involved?

Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 12 of 1988

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE 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 SARABHAI CHEMICALS PVT.LTD. -------------------------------------------------------------- Appearance: MR B.B.NAYAK FOR MR MANISH R BHATT for Applicant. MR R.K.PATEL WITH MR. B.D.KARIA FOR MR KC PATEL for Respondent No. 1 -------------------------------------------------------- CORAM : MR.JUSTICE A.R.DAVE and MR.JUSTICE D.A.MEHTA

Date of decision: 28/06/2001 ORAL JUDGEMENT (Per : MR.JUSTICE A.R.DAVE) 1 At the instance of the Revenue, the Income-tax Appellate Tribunal, Ahmedabad Bench 'C' has referred to this Court the following question of law for its opinion under the provisions of section 256(1) of the Income Tax Act,1961. "Whether the Appellate Tribunal is right in law in deleting an amount of Rs.2.80

lakhs in respect of taxability of goodwill ?"

2 Learned Advocate Shri B.B.Nayak has appeared for the Revenue and learned Advocate Mr.R.K.Patel has appeared for the assessee.

3 The learned Advocates have drawn our attention to the judgment delivered by this Court in I.T.R.No.243 of 1985 and I.T.R No.243A/85 dated 8/3/2001. It is of the Revenue in I.T.R.No.243/85 and I.T.R.No.243A/85. m.m.bhatt

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