COMMISSIONER OF INCOME-TAX vs. SUHUD GEIGY LTD

ITR/359/1984HC GujaratGJHC24012024198404 May 1999Author: HONOURABLE MR. JUSTICE R.BALIA,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
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What did the High Court hold?

The High Court answered the four questions as follows: 1. Question 1 was answered in the negative, in favour of the Revenue and against the assessee. The Court relied on the Supreme Court decision in CIT v. Arvind Mills Ltd., 193 ITR 255, which held that for computing the actual cost of imported machinery for development rebate, any additional amount payable due to devaluation of the Indian Rupee is not to be taken into account, in view of Section 43A(1) and (2) of the Act. 2. Question 2 was answered in the negative, in favour of the Revenue and against the assessee, based on the concession made by the assessee's counsel due to the smallness of the amount, without examining the merits. 3. Question 3 was answered in the affirmative, in favour of the assessee and against the Revenue. The Court followed its own decision in 115 ITR 879, which was affirmed by the Supreme Court in 224 ITR 383, regarding the allowance of relief under Section 80J for building, plant, and machinery under erection. 4. Question 4 was answered in the affirmative, in favour of the assessee and against the Revenue. The Court followed its decision in CIT v. Nagri Mills Ltd., 166 ITR 292, and the Andhra Pradesh High Court's decision in Addl. CIT v. Vazir Sultan Tobacco Co. Ltd., 122 ITR 251, holding that interest under Section 216 is leviable only if there is a finding of deliberate inaccurate statements leading to delayed payment of the first two installments of advance tax, not for general underestimation of income for the whole year.

What were the facts?

The Commissioner of Income-tax (Revenue) referred four questions of law to the High Court of Gujarat arising from an Income Tax Appellate Tribunal (ITAT) order concerning Assessment Year 1976-77. The assessee is Suhrid Geigy Ltd. The ITAT's order was challenged by the Revenue. The questions pertained to the allowance of development rebate on exchange rate differences, deletion of rest house expenses, relief under Section 80J for building and machinery under erection, and the levy of interest under Section 216 for underestimation of advance tax.

What were the issues?

The Tribunal had to decide four questions of law: 1. Whether the Tribunal erred in allowing development rebate on Rs. 5,48,443, representing the difference in exchange on remittance outside India, disregarding Section 43A(2) of the Income-tax Act, 1961. 2. Whether the deletion of an addition of Rs. 7,592 on account of rest house expenses was justified. 3. Whether the Tribunal was right in directing the Income-tax Officer to allow relief under Section 80J in respect of building, plant, and machinery under erection. 4. Whether the Tribunal was right in holding that the Income-tax Officer was not justified in levying interest under Section 216, as there was nothing to indicate that advance tax was underestimated for reasons other than underestimation of income. Assessee's contentions: The assessee conceded on Question 2. For Question 4, the assessee relied on the High Court's decision in CIT v. Nagri Mills Ltd., 166 ITR 292, and the Andhra Pradesh High Court's decision in Addl. CIT v. Vazir Sultan Tobacco Co. Ltd., 122 ITR 251. Revenue's contentions: The Revenue relied on the Supreme Court's decision in CIT v. Arvind Mills Ltd., 193 ITR 255, for Question 1. The Revenue's stance on Question 2 was implicitly that the addition should be upheld. For Question 3, the Revenue's position was implicitly against the assessee, as the High Court affirmed a decision that was against the Revenue. For Question 4, the Revenue's position was implicitly that interest under Section 216 was leviable.

Which sections of the Income-tax Act were involved?

Section 43A,Section 80J,Section 216

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 359 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE R.BALIA. and MR.JUSTICE A.R.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question 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? 1 to 5: No

The order continues below.

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