CIT HARYANA ROHTAK vs. PORRITTS & SPENCER(ASIA)LTD,FA

ITR/51/1998HC Punjab & HaryanaPHHC01038026199816 September 2008Author: MR JUSTICE RAKESH KUMAR GARG,MR. JUSTICE ADARSH KUMAR GOEL3 pages
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What were the facts?

The Commissioner of Income-tax, Haryana, Rohtak (Revenue) has filed an Income Tax Reference (ITR) No. 51 of 1998 before the High Court of Punjab and Haryana at Chandigarh, challenging an order of the Income Tax Appellate Tribunal (ITAT), Delhi Bench 'C'. The assessment year in question is 1984-85. The dispute pertains to the disallowance of expenses under Section 40A(5) of the Income Tax Act, 1961, specifically concerning salary, wages, and bonus paid to personal servants engaged by the employees of M/s Porrits & Spencer (Asia) Ltd. (Assessee). The ITAT had previously adjudicated a similar issue for assessment year 1983-84 in favour of the assessee, and the Revenue had not appealed that decision. The ITAT, for assessment year 1984-85, restored the matter to the Assessing Officer to consider the assessee's claim in light of favourable Tribunal judgments.

What did the High Court hold?

The High Court held that the ITAT was right in law. The Court noted that the Tribunal had restored the matter to the Assessing Officer to consider the assessee's claim in light of any favourable Tribunal judgments, particularly those passed after the CIT(A)'s order. The Revenue failed to demonstrate that the Tribunal's finding for the prior assessment year (1983-84) was challenged or to provide reasons for taking a different view for the assessment year 1984-85. Consequently, the Court found no error in the view taken by the Tribunal. The question of law was answered against the Revenue and in favour of the Assessee. The operative direction was to consider the assessee's claim in light of relevant judgments.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Hon’ble ITAT was right in law in holding that the provisions of rule 3(c)(ii) are applicable for computing the disallowance under Section 40A(5) of salary, wages, and bonus paid to personal servants engaged by the employees of the assessee? Assessee's Contention: The assessee relied on a decision of the Tribunal dated 27th February, 1997, which had decided an identical issue in its favour. This decision referenced an earlier Tribunal order for assessment year 1986-87. Revenue's Contention: The revenue did not demonstrate that the Tribunal's finding for assessment year 1983-84 (which was similar) was challenged, nor did it provide any reason to deviate from that view for the current assessment year. The revenue's counsel was unable to show any error in the Tribunal's finding.

Which sections of the Income-tax Act were involved?

Section 40A(5)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.R. No.51 of 1998 Date of decision: 16.09.2008 The Commissioner of Income-tax, Haryana, Rohtak. -----Applicant Vs. M/s Porrits & Spencer (Asia) Ltd., Faridabad. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE RAKESH KUMAR GARG Present: Mr. Yogesh Putney, Sr. Standing Counsel for the revenue. Mr. A.C. Jain, Advocate for assessee. -----

ORDER: Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Delhi Bench ‘C’, New Delhi arising out of I.T.A. No.9226/Del/96 in respect of assessment year 1984-85:- “Whether, on the facts and in the circumstances of the case, the Hon’ble ITAT was right in law in holding that the computing the disallowance u/s 40A(5) of the following expenses the provisions of rule 3(c) (ii) are applicable: Salary wages and bonus paid to personal servants engaged by the employees of the assessee?”

I.T.R. No.51 of 1998

The Tribunal has recorded the following finding:- “11. The last ground in the appeal pertains to the valuation of the wages paid to servants provided to the employees of the assessee company for purposes

The order continues below.

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