SARANGPUR MILLS LTD vs. COMMISSIONER OF INCOME TAX

ITR/304/1984HC GujaratGJHC24011969198411 July 2000Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE ANIL R. DAVE4 pages
AI SummaryPartly Allowed

What were the facts?

This is an Income Tax Reference made by the Income Tax Appellate Tribunal, Ahmedabad Bench 'A', to the High Court of Gujarat. The assessee is Saraspur Mills Ltd., and the respondent is the Commissioner of Income Tax. The reference concerns assessment years not explicitly stated but pertains to specific disallowances and claims made by the assessee. The High Court is asked to decide four questions of law arising from the Tribunal's order. The procedural history involves the Tribunal referring these questions to the High Court under Section 256(1) of the Income-tax Act, 1961, for the court's opinion.

What did the High Court hold?

The High Court answered the questions as follows: 1. Question 1 was answered in the affirmative, against the assessee and in favour of the revenue. The Court held that expenses related to the expansion of the company's capital base, such as bonus share issue expenses, are capital in nature, citing Punjab State Industrial Development Corporation Ltd. v. CIT. 2. For the first part of Question 2, concerning reimbursement of medical expenses, the Court answered in the affirmative, against the assessee and in favour of the revenue, following its own decision in CIT v. Raipur Manufacturing Co., which held such reimbursements are to be considered for disallowance under Section 40(c). For the second part of Question 2, regarding personal accident premium, the Court answered in the negative, in favour of the assessee and against the revenue. It relied on CIT v. Cama Motors Pvt. Ltd., holding that such premiums are not necessarily perquisites unless it's shown the director wanted it for personal benefit and it was their obligation to pay. 3. Question 3 was answered in favour of the assessee and against the revenue, following the Supreme Court's decision in CIT v. Mafatlal Gangabhai and Co. (P) Ltd., which held that cash payments like house rent allowance are not covered by Sections 40(a)(v) and 40A(5). 4. Question 4 was answered against the assessee and in favour of the revenue, based on the High Court's previous decision in the assessee's own case (I.T.R. No. 27 of 1984), which held that exhaust fans, being electrical machinery not forming an integral part of textile machinery, are not eligible for extra shift allowance. The reference stands answered accordingly.

What were the issues?

The High Court was asked to decide four questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in disallowing the bonus share issue expenses of Rs. 49,708/- as capital expenditure, turning on the nature of the expenditure in relation to the company's capital base. 2. Whether the Appellate Tribunal has been right in law in holding that the amounts relating to reimbursement of medical expenses and personal accident premium cannot be treated as perquisite for the purpose of disallowance under Section 40(c) of the I.T. Act, 1961. 3. Whether cash payment of house rent allowance amounting to Rs. 31,738/- is not includible for the purpose of computing disallowance under Section 40A(5) of the I.T. Act, 1961. 4. Whether the assessee is entitled to extra shift allowance on exhaust fans costing Rs. 39,174/-. Assessee's contentions are implied by the questions raised, seeking to treat expenses as revenue, exclude certain reimbursements from perquisites, include cash house rent allowance for disallowance calculation, and claim extra shift allowance. The revenue's contentions are implied by the Tribunal's disallowances and the questions framed, seeking to treat bonus share expenses as capital, include reimbursements as perquisites, exclude cash house rent allowance from disallowance calculation, and deny extra shift allowance. Authorities relied on include Punjab State Industrial Development Corporation Ltd. v. CIT, CIT v. Raipur Manufacturing Co., CIT v. Cama Motors Pvt. Ltd., CIT v. Mafatlal Gangabhai and Co. (P) Ltd., and the assessee's own case (I.T.R. No. 27 of 1984).

Which sections of the Income-tax Act were involved?

Section 256(1),Section 40(c),Section 40A(5),Section 40(a)(v)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 304 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.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 256(1)

All 755 judgments and leading authorities on Section 256(1) →

Latest GST High Court judgments

Search GST case law →