C.I.T. CENTRAL LUDHIANA vs. M/S AVON CYCLES (P) LTD.

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ITR/140/1995HC Punjab & HaryanaPHHC01032196199514 November 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL2 pages
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What did the High Court hold?

The High Court answered the referred questions of law. Regarding Question 1, concerning the retrospective application of the first proviso to Section 43B, the Court held that the matter was covered by the Supreme Court's judgment in Allied Motors (P) Limited v. CIT, (1997) 224 ITR 677. This judgment was in favour of the assessee and against the revenue. Therefore, Question 1 was answered against the revenue and in favour of the assessee. For Question 2, concerning car maintenance and insurance expenses under Section 37(3A), the Court found that this issue was addressed in its own previous judgment dated September 18, 2006, in ITR No. 392 of 1995 (The Commissioner of Income Tax, Patiala v. M/s Punjab Tractors, Mohali). That judgment, following the Supreme Court's decision in Britannia Industries Limited v. CIT and another, (2005) ITR 546, had answered the question in favour of the revenue and against the assessee. Consequently, Question 2 was answered in favour of the revenue and against the assessee. The reference was disposed of accordingly.

What were the facts?

This case involves a reference to the High Court by the Income Tax Appellate Tribunal (ITAT) concerning the assessment year 1985-86. The petitioner is the Commissioner of Income Tax, Central Ludhiana, and the respondent is M/s Avon Cycles (P) Limited, Ludhiana. The ITAT's order under challenge is dated January 7, 1994, in ITA No.332/Chandi/1989. The High Court heard arguments from counsel for both the revenue and the assessee before proceeding to answer the questions of law referred to it. The reference was disposed of by the High Court.

What were the issues?

The High Court was asked to decide two questions of law: 1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the first proviso to section 43B, inserted by the Finance Act, 1987, w.e.f. 1.4.1988, has retrospective application? 2. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that expenses on car maintenance and insurance are not hit by the provisions of Section 37(3A) of the Income Tax Act? Arguments presented: For Question 1: The revenue contended that the first proviso to Section 43B, introduced by the Finance Act, 1987, with effect from April 1, 1988, should not be applied retrospectively. The assessee, conversely, argued for the retrospective application of this proviso. For Question 2: The revenue argued that expenses on car maintenance and insurance are hit by the provisions of Section 37(3A) of the Income Tax Act. The judgment does not record specific arguments from the assessee on this point, other than implicitly supporting the ITAT's finding.

Which sections of the Income-tax Act were involved?

Section 43B,Section 37(3A)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
ITR No.140 of 1995 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No. 140 of 1995 Date of decision:14.11.2006 The Commissioner of Income Tax, Central Ludhiana ....Petitioner versus M/s Avon Cycles (P) Limited, Ludhiana ....Respondent CORAM: HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present: Mr. SK Garg Narwana, Advocate, for the revenue. Mr. Akshay Bhan, Advocate, for the assessee.

JUDGMENT: Following questions of law have been referred for the opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, 'the Tribunal) arising out of its order dated 7.1.1994 in ITA No.332/Chandi/1989, for the assessment year 1985-86:- “1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the first proviso to section 43B, inserted by the Finance Act, 1987, w.e.f 1.4.1988, has retrospective application?

2.

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that expenses on car maintenance and insurance are not hit by the provisions of Section 37 (3A) of the Income Tax Act?”

We have heard learned counsel for the parties. We proceed to answer the questions referred. Re:Q.No.1 We find that the matter is covered by judgment of the Hon'ble Supreme Court in in Allied Motors (P) Limited v. CIT, (1997) 224 ITR

ITR No.140 of 1995 2 677, in favour of the assessee and against the revenue. Accordingly, Question No.1 is answered against the revenue and in favour of the assessee. Re:Q.No.2 We find that the issue involved in this question has been gone into by this Court vide judgment dated 18.9.2006 in ITR No.392 of 1995, The Commissioner of Income Tax, Patiala v. M/s Punjab Tractors, Mohali, wherein, following judgment of the Hon'ble Supreme Court in Britannia Industries Limited v. CIT and another, (2005) ITR 546, the question was answered in favour of the revenue and against the assessee. Accordingly, Question No.2 is answered in favour of the revenue and against the assessee. Reference is disposed of accordingly. (Adarsh Kumar Goel) Judge November 14, 2006 (Rajesh Bindal) 'gs' Judge

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