C.I.T. PATIALA vs. M/S HINDUSTAN WIRE PRODUCTS LTD. PATIALA

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ITR/69/1988HC Punjab & HaryanaPHHC01015844198813 December 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, in its decision dated December 13, 2006, answered both referred questions of law against the revenue and in favour of the assessee. The court acknowledged the concession made by the revenue's counsel, who stated that the issues had been addressed in a prior judgment of the High Court in ITR No. 15 of 1994. In that prior case, the High Court had relied on judgments from the Delhi High Court (Commissioner of Income-Tax v. Autopins (India)), Madras High Court (Commissioner of Income-Tax v. Bhavani Mills Ltd.), and Orissa High Court (Commissioner of Income-Tax v. Orissa Industries Ltd.). The reasoning adopted was that Section 36(1)(ii) of the Income Tax Act is not applicable to payments to which the Bonus Act does not apply, and the allowability of deductions for such payments should be considered with reference to Section 37 of the Act. Given the findings of the CIT(A) and the Tribunal, the deduction was rightly allowed. The reference was disposed of accordingly.

What were the facts?

This case concerns an Income Tax Reference (ITR) filed by the Commissioner of Income-tax, Patiala (the revenue) against M/s Hindustan Wire Products Ltd., Patiala (the assessee) for the assessment year 1979-80. The reference arose from an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, dated June 20, 1985. The High Court of Punjab and Haryana was asked to decide two questions of law referred by the ITAT. The revenue's counsel acknowledged that these questions had been previously addressed by the same High Court in a similar case, ITR No. 15 of 1994, concerning the assessment year 1985-86.

What were the issues?

The High Court was asked to decide the following questions of law: 1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing deduction u/s 36(1)(ii) of the Income Tax Act, 1961, for bonus paid in excess of the limits prescribed under the Payment of Bonus Act, 1965? 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the payment of bonus over and above the prescribed limits under the Payment of Bonus Act is an admissible expenditure u/s 37(1) of the Income Tax Act, even though the expenditure falls under the specific Section 35 of the said Act? Contentions: Revenue: The revenue's counsel conceded that the questions referred had already been decided by the High Court in ITR No. 15 of 1994, Commissioner of Income Tax (Central), Ludhiana v. Punjab Concast Steels Ltd., Ludhiana. The revenue did not present separate arguments for this specific case, relying on the previous judgment. Assessee: No specific contentions were recorded for the assessee in this judgment, as the revenue's counsel made a concession based on prior High Court rulings.

Which sections of the Income-tax Act were involved?

Section 36(1)(ii),Section 37(1),Section 35

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.69 of 1988 Date of decision: 13.12.2006 The Commissioner of Income-tax, Patiala. -----Applicant Vs. M/s Hindustan Wire Products Ltd., Patiala. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE RAJESH BINDAL Present: Dr. N.L. Sharda, Advocate for the revenue. -----

ORDER: Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated 20.06.1985 in I.T.A. No.69/Chandi/84 in respect of assessment year 1979-80:- “1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing deduction u/s 36 (1)(ii) of bonus paid in excess of the limits prescribed under the payment of Bonus Act, 1965?

2.

Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the payment of bonus over and above the prescribed limits under the payment of Bonus Act is an admissible expenditure u/s 37 (1) of the I.T. Act even though the expenditure falls under the specific Section 35 of the said Act?” Learned counsel for the revenue fairly states that the questions referred have already been gone into by this Court vide order dated 29.11.2006 in I.T.R. No.15 of 1994, Commissioner of Income Tax (Central), Ludhiana v. Punjab Concast Steels Ltd., Ludhiana for the assessment year 1985-86, wherein, after referring the judgments of Delhi High Court in Commissioner of I.T.R. No.69 of 1988 Income-Tax v. Autopins (India) (1991) 192 ITR 161, Madras High Court in Commissioner of Income-Tax v. Bhavani Mills Ltd. (1999) 237 ITR 855 and Orissa High Court in Commissioner of Income-Tax v. Orissa Industries Ltd. (1993) 203 ITR 449, the questions referred had been answered against the revenue and in favour of the assessee and it was held as under:- “…………..We are also in agreement with the view taken in the judgments relied upon that Section 36(1)(ii) is not applicable to payments to which the Bonus Act does not apply and allowability of deductions in respect of such a payment is to be considered with reference to Section 37 of the Act. Once this is so, in view of the finding recorded by the CIT(A) as well as Tribunal, deduction was rightly allowed.“ In view of above, the questions referred are answered against the revenue and in favour of assessee. The reference is disposed of. ( ADARSH KUMAR GOEL ) JUDGE December 13, 2006 ( RAJESH BINDAL ) ashwani JUDGE Pag e

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