COMMISSIONER OF INCOME-TAX vs. RAIPUR MFG CO LTD

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ITR/209/1984HC GujaratGJHC24011883198409 February 1999Author: HONOURABLE DR. JUSTICE J.N.BHATT,HONOURABLE MR. JUSTICE ANIL R. DAVE2 pages
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What did the High Court hold?

The High Court held that the Tribunal was right in law in allowing the sums as deductions. The Court found that the ratio propounded in its own decision in Commissioner of Income-tax vs. Ashoka Mills Limited, 218 ITR 526 (Guj.), was squarely attracted to the present case. In that precedent, payment of royalty was held to be in the course of the profit-earning process and not for the acquisition of an asset or a right of a permanent character. Consequently, it was held to be deductible as revenue expenditure. The High Court expressed complete agreement with the said decision. Therefore, the question referred to the High Court was answered in the affirmative, meaning against the revenue and in favour of the assessee. The reference was disposed of accordingly.

What were the facts?

This case involves an Income Tax Reference filed by the Commissioner of Income-tax against Raipur Mfg Co Ltd. The reference concerns assessment years 1979-80 and 1980-81. The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, had previously held that sums of Rs. 6757 and Rs. 5563 for AY 1979-80, and Rs. 32,358 for AY 1980-81, were allowable as deductions in computing the total income of the assessee. The High Court of Gujarat was asked to decide on the correctness of this ITAT ruling.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sums of Rs. 6757 and Rs. 5563 for AY 1979-80 were allowable as deduction in computing the total income of the assessee? (Question of law, turning on the deductibility of expenditure). 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of Rs. 32,358 for AY 1980-81 was allowable as deduction in computing the total income of the assessee? (Question of law, turning on the deductibility of expenditure). Assessee's contention: The sums were allowable as deductions. (Implied by the Tribunal's favorable ruling). Revenue's contention: The sums were not allowable as deductions. (Implied by the reference to the High Court). The judgment does not explicitly detail the arguments made by each side before the High Court, but it refers to a previous decision of the High Court in Commissioner of Income-tax vs. Ashoka Mills Limited, 218 ITR 526 (Guj.).

Which sections of the Income-tax Act were involved?

Section 256

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 209 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE J.N.BHATT 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?

-------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus RAIPUR MFG CO LTD -------------------------------------------------------------- Appearance: MR BB NAIK WITH MR MANISH R BHATT for Petitioner MR MANISH J SHAH FOR MR JP SHAH for Respondent

--------------------------------------------------------------

CORAM : MR.JUSTICE J.N.BHATT and MR.JUSTICE A.R.DAVE Date of decision: 09/02/99

ORAL JUDGEMENT (Per J.N.Bhatt, J.) By this reference, the Income Tax Appellate Tribunal, Ahmedabad Bench has referred the following question for our opinion, under section 256 of the Income Tax Act, 1961:

"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sums of Rs.6757 and Rs.5563 for A.Y. 79-80 and Rs.32,358 for A.Y.80-81 were allowable as deduction in computing the total income of the assessee." (vjn)

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