COMMISSIONER OF INCOME-TAX vs. ELECON ENGG CO

ITR/368/1984HC GujaratGJHC24012033198401 August 2000Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
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What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench-B, referred two questions of law to the High Court of Gujarat concerning Assessment Years 1978-79 and 1971-72. The assessee, Elecon Engg Co., a public limited company, claimed deductions for Guest House expenses of Rs. 42,884 and bank charges of Rs. 20,215 for weighted deduction under Section 35B. The Income Tax Officer (ITO) disallowed the entire Guest House expenses and the weighted deduction for bank charges. The Commissioner of Income-tax (Appeals) allowed 90% of the Guest House expenses and the entire bank charges claim. The ITAT confirmed the CIT(A)'s order.

What did the High Court hold?

The High Court answered the first question in the affirmative, in favour of the assessee. It relied on its own decision in CIT v. Ahmedabad Mfg. & Calico Printing Co. Ltd. (197 ITR 538), which held that rent and repair costs for premises used as a guest house were deductible under Section 30(a)(i) and could not be disallowed under Section 37(4). Therefore, the Tribunal was correct in allowing 90% of the guest house expenses. For the second question, the High Court answered in the negative, in favour of the Revenue. It followed its decision in ISABGUL EXPORT CORPORATION v. CIT (205 ITR 237), which held that bank charges did not fall under any sub-clause of Section 35B(1)(b) and thus were not eligible for weighted deduction. The Tribunal had erred in allowing the deduction for bank charges.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that only 10% of Rs. 42,884 was disallowable as Guest House expenses, and the balance was neither Guest House expenses nor entertainment expenditure disallowable under Section 37(4) or 37(2A) of the Income-tax Act, 1961? Assessee's Contention: Not recorded. Revenue's Contention: Not recorded. 2. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the expenses for bank charges of Rs. 20,215 were entitled to weighted deduction under Section 35B of the Income-tax Act, 1961? Assessee's Contention: Not recorded. Revenue's Contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 37(4),Section 37(2A),Section 35B,Section 30(a)(i)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 368 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and Hon'ble MR.JUSTICE A.R.DAVE

============================================================ 1. Whether Reporters of Local Papers may be allowed : YES 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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