COMMISSIONER OF INCOME-TAX vs. ASHOKA MILLS LTD

ITR/53/1985HC GujaratGJHC24012185198505 September 2000Author: HONOURABLE THE CHIEF JUSTICE MR. JUSTICE D.M.DHARMADHIKARI,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
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What were the facts?

This is an Income Tax Reference filed by the Revenue under Section 256(1) of the Income Tax Act, 1961, concerning the assessment year 1980-81. The reference arises from an order of the Income Tax Appellate Tribunal. The assessee is Ashoka Mills Ltd. The dispute involves two primary questions. The first concerns the deductibility of Rs 39,884 paid to Mettur Beardshell Limited for the use of the trademark 'Tebilised'. The second question relates to the applicability of Sections 40(c)/40A(5) to medical benefits, gratuity paid to the Managing Director, personal accident insurance premium for the Managing Director, and reimbursement of medical expenses to employees.

What did the High Court hold?

The High Court answered the questions posed. Regarding the first question, concerning the deduction for the use of the trademark 'Tebilised', both the Revenue and the assessee agreed that the issue was squarely covered in favour of the assessee by the decision in CIT vs. Ashoka Mills Limited, 218 ITR 586. Therefore, the Tribunal was held to be right in upholding the assessee's claim. For the second question, the court bifurcated it. The first part, relating to medical benefits and gratuity paid to the Managing Director, was answered against the assessee, relying on the decision in CIT vs. Raipur Manufacturing Co., 231 ITR 598, indicating that Sections 40(c)/40A(5) would be applicable. The second part of the second question, concerning the premium paid for personal accident insurance of the Managing Director and reimbursement of medical expenses to employees, was answered in favour of the assessee, based on the decision of the High Court in CIT vs. Cama Motors Private Limited, 234 ITR 699.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in upholding the assessee's claim for deduction of Rs 39,884 paid to Mettur Beardshell Limited for the use of the trademark 'Tebilised' (under Section 37 of the Income Tax Act, 1961)? 2. Whether the appellate tribunal was right in law in holding that the provisions of Section 40(c)/40A(5) of the Income Tax Act, 1961, would not be applicable in the case of medical benefits, gratuity paid to the Managing Director, premium paid for personal accident insurance of the Managing Director, and reimbursement of medical expenses paid to the employees of the assessee company? Assessee's contentions: The assessee relies on the decision in CIT vs. Ashoka Mills Limited, 218 ITR 586, for the first question. For the second question, the assessee relies on the decision in CIT vs. Cama Motors Private Limited, 234 ITR 699, regarding personal accident insurance premium and reimbursement of medical expenses. Revenue's contentions: The Revenue relies on the decision in CIT vs. Raipur Manufacturing Co., 231 ITR 598, for the part of the second question concerning medical benefits and gratuity paid to the Managing Director.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 40(c),Section 40A(5),Section 37

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 53 of 1985

For Approval and Signature:

Hon'ble CHIEF JUSTICE MR DM DHARMADHIKARI and Hon'ble MR.JUSTICE A.R.DAVE

============================================================ 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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