SYNBIOTICS LTD. vs. COMMISSIONER OF INCOME-TAX

ITR/82/1984HC GujaratGJHC24011756198431 January 1997Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE R.BALIA3 pages
AI SummaryDismissed

What were the facts?

This case involves an Income Tax Reference filed by Synbiotics Ltd. (the assessee) against the Commissioner of Income-tax (the revenue). The reference was made by the Income Tax Appellate Tribunal, Ahmedabad, for the opinion of the High Court of Gujarat. The assessment years are not explicitly stated. The challenge is to the Tribunal's order concerning the deductibility of gratuity liability and guarantee commission. The assessee sought to deduct a gratuity liability of Rs. 1,40,281/- and a guarantee commission payment of Rs. 19,991/-. The Tribunal had held against the assessee on both counts.

What did the High Court hold?

The High Court answered both questions in the affirmative against the assessee. Regarding Question 1, the Court, following the Supreme Court's decision in Shree Sajjan Mills Vs. CIT, held that the right to receive gratuity accrues upon retirement or termination, and the liability is contingent until then. Contingent liabilities do not constitute expenditure deductible under the mercantile system of accounting. Therefore, the Tribunal was justified in disallowing the gratuity liability of Rs. 1,40,281/-. For Question 2, the Court, following its own decision in Vallabh Glass Works Ltd. Vs. CIT, held that the Tribunal was justified in confirming the disallowance of the guarantee commission of Rs. 19,991/-. The reference was disposed of accordingly, with no issues left undecided.

What were the issues?

The Tribunal had to decide two questions of law referred by the Income Tax Appellate Tribunal: 1. Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the appellant was not entitled to Gratuity liability of Rs. 1,40,281/- under Section 28 read with Section 37 of the Act? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the disallowance of Guarantee Commission payment of Rs. 19,991/- in connection with the purchase of machinery from foreign suppliers? The assessee's counsel argued that Question 1 is covered by the Supreme Court decision in Shree Sajjan Mills Vs. CIT (156 ITR 585). For Question 2, the assessee's counsel contended that the matter is covered by this Court's decision in Vallabh Glass Works Ltd. Vs. CIT (137 ITR 389). The revenue's contentions are not explicitly recorded, but the judgment implies they supported the Tribunal's disallowances.

Which sections of the Income-tax Act were involved?

Section 28,Section 37,Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 82 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE R.BALIA. ============================================================ 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?

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 28

All 1,644 judgments and leading authorities on Section 28 →

Recent GST High Court judgments

Search GST case law →