C.I.T LDH vs. M/S HERO CYCLES

ITR/28/1994HC Punjab & HaryanaPHHC01024696199421 December 2007Author: MR. JUSTICE M.M. KUMAR,MR JUSTICE RAKESH KUMAR JAIN4 pages
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What were the facts?

This case involves an Income Tax Reference (ITR) filed by the Commissioner of Income-tax (Central), Ludhiana (the revenue) against M/s Hero Cycles (P) Ltd., Ludhiana (the assessee) for the assessment year 1982-83. The reference was made by the Income Tax Appellate Tribunal (ITAT) at the instance of the revenue. The ITAT had passed an order dated 22.4.1993 in I.T.A. No. 125/Chandi/1988. The High Court was asked to decide five questions of law referred by the ITAT. However, the revenue confined its arguments to only one question, Question No. 4, and did not press the other four questions.

What did the High Court hold?

The High Court decided Question No. 4 in favour of the revenue and against the assessee. The Court noted that the revenue's counsel had argued that this specific question had already been decided by a Division Bench of the same High Court in the case of M/s Avon Cycles (P) Limited and also in the case of Shri Ved Parkash Aggarwal, where similar questions were answered in favour of the revenue. The assessee's counsel could not controvert this argument or cite any contrary judgment. Therefore, the Court answered Question No. 4 in line with the aforementioned Division Bench judgments. The other four questions (1, 2, 3, and 5) were not pressed by the revenue and were accordingly returned unanswered by the High Court. The operative direction was to answer Question No. 4 in favour of the revenue.

What were the issues?

The Tribunal had to decide five questions of law. The revenue, however, confined its arguments to Question No. 4. The questions referred were: 1. Whether the ITAT was right in allowing weighted deduction under section 35B on commission paid to parties in India? 2. Whether the ITAT was right in holding that Rule 6AA, effective from 1.8.1981, was applicable to pending assessments for previous years ending before its operation? 3. Whether the ITAT was right in holding Rule 6B inapplicable to gifts to dealers exceeding Rs. 50 each, assuming they did not bear the assessee's name and logo? 4. Whether the ITAT was right in holding that lodging expenses are not entertainment expenses? 5. Whether the ITAT was right in allowing full triple shift allowance on machinery despite it not working for the entire period of the previous year? Assessee's arguments: Not recorded for questions 1, 2, 3, and 5 as they were not pressed by the revenue. For Question No. 4, the assessee claimed deduction for dealers' board and lodging expenses and lodging/boarding expenses out of export promotion expenses. The ITAT had held these to be business expenses, not entertainment expenses. Revenue's arguments: For Question No. 4, the revenue argued that this Court had already decided a similar question in favour of the revenue in the case of M/s Avon Cycles (P) Limited, Ludhiana v. The Commissioner of Income Tax (Central) Ludhiana and The Commissioner of Income Tax, Patiala v. Shri Ved Parkash Aggarwal, Ludhiana. The revenue did not press questions 1, 2, 3, and 5.

Which sections of the Income-tax Act were involved?

Section 35B,Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH DATE OF DECISION: December 21, 2007 The Commissioner of Income-tax (Central), Ludhiana …Applicant Versus M/s Hero Cycles (P) Ltd., Ludhiana. …Respondent CORAM: HON’BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE RAKESH KUMAR JAIN Present: Mr. Sanjiv Bansal, Advocate, for the applicant-revenue. Mr. Akshay Bhan, Advocate, for the respondent-assessee. M.M. KUMAR, J. At the instance of the revenue, the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for brevity, ‘the Tribunal’), while exercising juri iction under Section 256(1) of the Income-tax Act, 1961 (for brevity, ‘the Act’), has referred the following questions of law, which are claimed to have arisen from order dated 22.4.1993, passed in I.T.A. No. 125/Chandi/1988, in respect of assessment year 1982-83:- “1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in allowing weighted deduction under section 35B on commission paid to the parties in India?

2.

Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in l

The order continues below.

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