COMMISSIONER OF INCOME TAX vs. DEEPAK NITRITE LTD.

ITR/257/1985HC GujaratGJHC24012386198516 June 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA4 pages
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What were the facts?

This judgment concerns two Income Tax References (No. 257 of 1985 and No. 257-A of 1985) made by the Income Tax Appellate Tribunal, Ahmedabad Bench 'B', at the instance of the revenue. The assessee is Deepak Nitrite Ltd. The references arise from the Tribunal's orders in I.T.A. Nos. 1155 and 1212/Ahd/1983, and I.T.A. No. 911/Ahd/1983. The High Court of Gujarat at Ahmedabad was asked to provide its opinion on questions of law referred by the Tribunal. The learned advocates for both parties submitted that the questions had already been concluded by previous judgments.

What did the High Court hold?

The High Court answered the referred questions based on previously decided cases. For the first question of I.T.R. No. 257, concerning depreciation on factory roads, the Court followed the decision in CIT v. Gwalior Rayon Silk Mfg. Co. Ltd., 196 ITR 149, holding that roads inside the factory should be treated as part of the building, allowing depreciation. This question was answered in the affirmative, in favour of the revenue. For the second question of I.T.R. No. 257, regarding the deduction for superannuation fund contribution, the Court followed the Supreme Court's decision in CIT v. Sirpur Paper Mills, 237 ITR 41. The question was answered in the affirmative, in favour of the assessee. For the first question of I.T.R. No. 257-A, concerning foreign tour expenses, the Court noted that the same question for an earlier assessment year in the assessee's own case had been answered in the negative, in favour of the revenue. Therefore, this question was answered in the negative, against the assessee. For the second question of I.T.R. No. 257-A, regarding commission paid to directors, the Court followed its decision in CIT v. Rohit Mills Ltd., 219 ITR 228, answering the question in the negative, against the assessee and in favour of the revenue. All four questions were answered, and the references were disposed of.

What were the issues?

The Tribunal referred four questions of law for the High Court's opinion. For I.T.R. No. 257 of 1985: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in concluding that roads inside the factory should be treated as part of the building and depreciation allowed thereon? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in concluding that the assessee was entitled to a deduction of the full amount of Rs. 1,74,747 incurred towards initial contribution to an approved superannuation fund under Section 36(1)(iv) of the Income-tax Act, and not 80% as per a Board notification? For I.T.R. No. 257-A of 1985: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in concluding that foreign tour expenses incurred on the travel of the Managing Director and some executives was an allowable revenue expenditure? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in concluding that commission paid to the whole-time director and Managing Director was not covered under Section 40(c) of the Income-tax Act? Assessee's contentions were not explicitly recorded for any issue. The revenue's contentions were implicit in the questions referred. For the first question of I.T.R. No. 257, the revenue likely argued against treating factory roads as buildings for depreciation. For the second question of I.T.R. No. 257, the revenue likely argued for applying the 80% limit on superannuation fund contribution. For I.T.R. No. 257-A, the revenue likely argued against the allowability of foreign tour expenses and for the applicability of Section 40(c) to director commissions.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 36(1)(iv),Section 40(c)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 257 of 1985

and INCOME TAX REFERENCE No 257-A of 1985

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 i

The order continues below.

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