COMMISSIONER OF INCOME-TAX vs. CHALTHAN VIBHAG KHAND UDYOG

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ITR/122/1984HC GujaratGJHC24011796198420 July 1998Author: HONOURABLE MR. JUSTICE C.K.THAKKER,HONOURABLE MR. JUSTICE M.C.PATEL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal had not committed any error of law. Citing the Supreme Court's decision in Commissioner of Income-Tax v. Kotagiri Industrial Co-operative Tea Factory Ltd (224 ITR 604), the Court found that the Tribunal was correct in its order. The principle established by the Supreme Court was that before considering deductions under Section 80B(5), the Income Tax Officer is justified in setting off credit losses of earlier years in accordance with Section 42 of the Act. If these set-offs result in no positive income, then deductions under Section 80P cannot be allowed. The High Court found that the circumstances in the present case were almost similar to the Kotagiri case, and therefore, the principle applied. The reference was answered in favour of the Revenue and against the Assessee.

What were the facts?

The assessee, Chalthan Vibhag Khand Udyog, a co-operative society manufacturing white sugar, claimed deductions of Rs. 2,89,855 under Section 80P(2)(d)(i) and Rs. 233 under Section 80P(2)(d) for assessment year 1974-75. The Income Tax Officer disallowed the claim under Section 80P(2) stating there was no positive income after accounting for carried forward losses. The Commissioner (Appeals) upheld this decision. The Income Tax Appellate Tribunal also dismissed the assessee's further appeal. The High Court of Gujarat was considering a reference on whether the Tribunal was justified in its decision.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to deduction as contemplated under sections 80P & 80G of the Income-tax Act, 1961? (Question of law) Assessee's Contention: The assessee argued that it was entitled to deductions under Sections 80P and 80G. (Specific arguments not detailed in the judgment). Revenue's Contention: The revenue contended that the Income Tax Officer rightly disallowed the deduction under Section 80P(2) because there was no positive income after setting off carried forward losses from earlier years, as per Section 42 of the Act. The High Court of Madras decision in Commissioner of Wealth Tax, Tamil Nadu II Vs. K. Lakshmi; 142 ITR 657 was cited by the assessee, but the revenue's position was implicitly supported by the Supreme Court's ruling in Commissioner of Income-Tax v. Kotagiri Industrial Co-operative Tea Factory Ltd (224 ITR 604).

Which sections of the Income-tax Act were involved?

Section 80P,Section 80G,Section 80P(2)(d)(i),Section 80P(2)(d),Section 80B(5),Section 42

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 122 of 1984 For Approval and Signature: Hon'ble MR.JUSTICE C.K.THAKKER and MR.JUSTICE M.C.PATEL ============================================================ 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 CHALTHAN VIBHAG KHAND UDYOG -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner MR JP SHAH for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE C.K.THAKKER and MR.JUSTICE M.C.PATEL Date of decision: 20/07/98 ORAL JUDGEMENT (Per C.K.Thakker, J) The following question is referred to us for our consideration : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to deduction as contemplated under sections 80P & 80G of the Income-tax Act, 1961?" 2. The assessee is a co-operative society engaged in manufacturing white sugar from sugarcane. For the assessment year 1974-75 it claimed deduction of Rs.2,89,855/- under Section 80P(2)(d)(i) and Rs.233 under Section 80P(2)(d) of the Income-tax Act, 1961. The Income Tax Officer (I.T.O.) disallowed the assessee's claim made under Section 80P(2) of the Act on the ground that there was no positive income after giving effect to carried forward losses of earlier years. The Commissioner (Appeals) upheld the decision of ITO and further appeal filed before the Income-tax Appellate Tribunal also came to be dismissed. 3. We have considered the submission of the learned Counsel for the assessee. We have also perused the decision of the High Court of Madras in Commissioner of Walth Tax, Tamil Nadu II Vs. K.Lakshmi; 142 ITR 657. In our opinion, however, the Tribunal hase not committed any error of law. Considering Section 80 B(5) as interpreted by the Supreme Court in Commissioner of Income-Tax v. Kotagiri Industrial Co-operative Tea Factory Ltd reported in 224 ITR 604, the Tribunal was right in passing the

impugned order.

4.

Almost in similar circumstances, the Supreme Court held that before considering the matter of deduction under Section 80 B (5), the Income Tax Officer rightly set off the credit loss of earlier years in accordance with Section 42 of the Act and finding that the same exceeded, the ITO did not allow the deduction under Section 80 P of the Act. The principle laid down by the Supreme Court in Kotagiri Industrial Co-operative Tea Factory Ltd will apply to the facts of the present case also.

5.

We, therefore, see no reason to uphold the contention on behalf of the assessee. Accordingly, the reference is answered in favour of the Revenue and against the Assessee. No order as to costs.

(C.K.Thakker, J)

(M.C.Patel, J) jitu

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