CIT PATIALA vs. SWARAJ MAZDA LTD.CHD.

ITR/83/1998HC Punjab & HaryanaPHHC01038066199804 December 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL2 pages
AI SummaryDismissed

What were the facts?

This case involves a reference to the High Court of Punjab and Haryana concerning an order passed by the Income-Tax Appellate Tribunal (ITAT), Chandigarh Bench. The assessment year in question is 1986-87. The Commissioner of Income-tax, Patiala (the revenue) is the petitioner, and Swaraj Mazda Ltd., Chandigarh (the assessee) is the respondent. The dispute revolves around the disallowance of expenditure incurred by the assessee by way of rent for a Guest House. The ITAT had allowed this expenditure, which the revenue challenged.

What did the High Court hold?

The High Court answered the referred question of law against the revenue and in favour of the assessee. The Court noted that the ITAT had followed its earlier judgment in the case of Commissioner of Income Tax, Patiala Vs. Punjab Tractors Limited, Mohali. The High Court itself had gone into this issue in the Punjab Tractors' case and decided it against the assessee, following the Supreme Court's judgment in Britannia Industries Limited Vs. Commissioner of Income Tax and another. Therefore, in view of the binding precedent of the Supreme Court, the High Court found that the ITAT's decision allowing the expenditure was incorrect. The operative direction was to answer the question in favour of the revenue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing expenditure incurred by way of rent of a Guest House which was disallowed according to the specific provisions of section 37(4) read with section 37(5) of the Income-tax Act, 1961? Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT had allowed the expenditure. Revenue's Contention: The revenue contended that the expenditure incurred by way of rent of a Guest House should have been disallowed in accordance with the specific provisions of section 37(4) read with section 37(5) of the Income-tax Act, 1961. The revenue relied on the High Court's earlier judgment in Commissioner of Income Tax, Patiala Vs. Punjab Tractors Limited, Mohali, ITR No.570 of 1995 decided on 15.9.2006, and the Supreme Court's judgment in Britannia Industries Limited Vs. Commissioner of Income Tax and another, (2005) 278 ITR 546.

Which sections of the Income-tax Act were involved?

Section 37(4), Section 37(5)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.R. No.83 of 1998 Date of Decision:4.12.2006 Commissioner of Income-tax, Patiala .....Petitioner Vs. Swaraj Mazda Ltd., Chandigarh

.....Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present:- Dr. N.L.Sharda, Advocate for the revenue. Shri Pankaj Jain, Advocate. **** ADARSH KUMAR GOEL, J. The following question of law has been referred for opinion of this Court arising out of order passed by the Income-Tax Appellate Tribunal, Chandigarh Bench, Chandigarh in I.T.A. No.1474/91 dated 29.7.1997 in respect of assessment year 1986-87:- “Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing expenditure incurred by way of rent of Guest House which was disallowed according to the specific provisions of section 37(4) read with section 37(5) of the Income-tax Act, 1961?” Mohali, ITR No.570 of 1995 decided on 15.9.2006. The issue

The order continues below.

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