COMMISSIONER OF INCOME TAX vs. BHARAT VIJAY MILLS LTD.

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ITR/154/1984HC GujaratGJHC24011828198401 August 1996Author: HONOURABLE MR. JUSTICE B.C.PATEL,HONOURABLE MR. JUSTICE R.R.JAIN2 pages
AI SummaryAnswered Accordingly

What did the High Court hold?

The High Court answered the referred question in favour of the revenue and against the assessee. The Court's reasoning is based on its prior decision in the case of Gujarat Steel Tubes Ltd. Vs. Commissioner of Income-tax (210 ITR 358). In that case, the Court had held that an amount expended for the purchase of a deferred annuity policy is revenue expenditure for which a deduction cannot be granted under Section 37 of the Income Tax Act. Applying this precedent, the High Court found that the deferred annuity premium paid by Bharat Vijay Mills Ltd. was not an allowable revenue expenditure. The operative direction is to answer the question accordingly. No order as to costs was made.

What were the facts?

This case involves an Income Tax Reference No. 154 of 1984 before the High Court of Gujarat at Ahmedabad. The Commissioner of Income Tax is the applicant, and Bharat Vijay Mills Ltd. is the respondent. The Income Tax Appellate Tribunal (ITAT) has referred a specific question to the High Court for its opinion. The core of the dispute concerns an amount of Rs. 55,322, which was paid as deferred annuity premium in respect of two Managing Directors of the company. The ITAT had previously held this amount to be revenue expenditure and allowable as such. The assessment year(s) and the specific order of the ITAT are not explicitly detailed, nor is the procedural history leading to the reference, beyond the fact that the ITAT made the reference.

What were the issues?

The Tribunal had to decide the following question of law: 1. Whether, on the facts and in the circumstances of the case, the amount of Rs. 55,322, being deferred annuity premium paid in respect of two Managing Directors of the Company, is rightly held to be a revenue expenditure and allowable as such? The assessee's contention, as implied by the ITAT's prior holding, is that the deferred annuity premium is a revenue expenditure and therefore allowable. The revenue's contention, which the High Court ultimately upholds, is that such expenditure is not allowable as revenue expenditure. The judgment does not explicitly detail the arguments presented by each side before the High Court, but it references a prior decision of the same court in Gujarat Steel Tubes Ltd. Vs. Commissioner of Income-tax, reported in 210 ITR 358, which dealt with a similar question.

Which sections of the Income-tax Act were involved?

Section 37

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 154 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE B.C.PATEL and MR.JUSTICE R.R.JAIN ============================================================ 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 or any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

-------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus BHARAT VIJAY MILLS LTD. -------------------------------------------------------------- Appearance: MR BJ SHELAT for M/s MANISH R BHATT & Co., Advocates for Applicant. SERVED for Respondent No. 1 --------------------------------------------------------------

CORAM : MR.JUSTICE B.C.PATEL and MR.JUSTICE R.R.JAIN Date of decision: 01/08/96

ORAL JUDGEMENT

The Income Tax Appellate Tribunal has referred the following question for the opinion of this Court :-

"Whether on the facts and in the circumstances of the case, the amount of Rs. 55,322/- being deferred annuity premium paid in respect of two Managing Directors of the Company is rightly held to be a revenue expenditure and allowable as such?"

2.

In the case of Gujarat Steel Tubes Ltd. Vs. Commissioner of Income-tax, reported in 210 ITR 358 similar question has been answered by the Court wherein the Court has held that the amount expended for purchase of the deferred annuity policy is revenue expenditure for which deduction can not be granted under Sec. 37 of the Income Tax Act.

3.

Hence, we answer this question in favour of the revenue and against the assessee.

4.

Answer accordingly with no order as to costs.

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