THE COMMISSIONER OF INCOME TAX, COCHIN vs. HARRISONS MALAYALAM LTD., WILLINGDON ISL

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ITA/1272/2009HC KeralaKLHC01026033200902 November 2009Author: HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON,HONOURABLE MR.JUSTICE P.R.RAMAN4 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the licence fee paid by the assessee to RPG Enterprises Ltd., Mumbai, was incurred wholly and exclusively for the purpose of business, making it an allowable business expenditure under Section 37(1) of the Income Tax Act. The Tribunal's finding was based on its assessment of the facts, specifically whether the licence fee was paid exclusively for the assessee's business purposes. Consequently, the Tribunal concluded that this was a question of fact and did not raise any substantial question of law. The appeals filed by the Commissioner of Income Tax were dismissed.

What were the facts?

The assessee, Harrisons Malayalam Ltd., is a company engaged in the production and cultivation of tea, rubber, etc. For the assessment year 1998-99, the Assessing Officer (AO) completed the assessment under Section 143(3) at Rs. 11,82,46,750. The AO disallowed the claim for fee paid to RPG Enterprises Ltd., Mumbai, under Section 37(1). The Commissioner of Income Tax (CIT) invoked Section 263, holding the expenditure not wholly and exclusively for business purposes and directing a fresh assessment. The subsequent assessment under Section 143(3) fixed the total income at Rs. 12,28,38,760, again disallowing the licence fee. A similar disallowance occurred for assessment year 2000-01. The matter reached the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the licence fee paid by the assessee to RPG Enterprises Ltd., Mumbai, is an expenditure incurred wholly and exclusively for the purpose of business and thus allowable under Section 37(1) of the Income Tax Act, 1961. The assessee contended that the licence fee was incurred wholly and exclusively for the purpose of business. The revenue, through the CIT's order under Section 263, argued that the expenditure was not laid out wholly and exclusively for the purpose of business and therefore not allowable under Section 37(1). The Tribunal considered this a question of fact, not raising a substantial question of law.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 143(3),Section 263

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON MONDAY, THE 2ND NOVEMBER 2009 / 11TH KARTHIKA 1931 ITA.No. 1272 of 2009() ---------------------- ITA.194/COCH/2003 of INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------- HARRISONS MALAYALAM LTD., WILLINGTON ISLAND, KOCHI. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 02/11/2009, ALONG WITH I.T.APPEAL No.1364 of 2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R.RAMAN & P.R.RAMACHANDRA MENON ------------------------------- I.T.Appeal Nos. 1272 & 1364 of 2009 ------------------------------- Dated this the 2nd November, 2009

J U D G M E N T Raman, J. In I.T.Appeal No.1272/2009, the assessee is a company engaged in the production and cultivation of tea, rubber etc. Return of income for the assessment year 1998-99. Subsequently, the assessment was completed under Section 143 (3) of the Income Tax Act determining the total income at Rs.11,82,46,750/=. While so, the Assessing Officer disallowed the claim made by the assessee towards fee to RPG Enterprises Ltd., Mumbai, under Section 37(1) of the Income Tax Act. Accordingly, the Commissioner of Income Tax by order under Section 263 of the Income Tax Act, held that the expenditure claimed by the assessee towards licence fee is not laid out to be wholly and exclusively for the purpose of business and hence not allowable under Section 37(1) of the Income Tax Act. The assessment was accordingly set aside, with a direction to redo the assessment according to the directions contained therein. Subsequently, the assessment was completed under Section 143 (3) of the Income Tax Act, fixing the total income at Rs.12,28,38,760/=, disallowing the licence fee paid by the assessee towards RPG Enterprises Ltd.

2.

In I.T.No. 1364 of 2009 also, the assessment year is 2000-01, and the claim made by the assessee towards licence fee was disallowed on the self-same ground. Ultimately, the matter went before the Tribunal. The Tribunal held that the l licence fee paid by the assessee to RPG Enterprises Ltd., Mumbai, is incurred wholly and exclusively for the purpose of business and business expenditure is allowable under Section 37 (1) of the Income Tax Act. The finding of the Tribunal is based on the assessment of fact as to whether the licence fee paid is exclusively for the business purpose of the assessee, and therefore, we find that this is only a question of fact and do not raise any substantial question of law. Accordingly, the appeals are dismissed. P.R.RAMAN, JUDGE P.R.RAMACHANDRA MENON, JUDGE. nj.

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