CIT vs. M/S KAKAR COMPLEX STEELS PVT LTD

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ITR/583/1995HC Punjab & HaryanaPHHC01032585199513 November 2006Author: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
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What did the High Court hold?

The High Court of Punjab and Haryana, while considering the reference, noted that the matter was covered against the revenue by its own prior judgment in Commissioner of Income Tax Vs. Indo Asian Switchgears (P) Ltd, reported in (2002) 257 ITR 645 (P&H). Following this precedent, the High Court answered the question of law in favor of the assessee and against the revenue. The reasoning is based on the established legal principle laid down in the Indo Asian Switchgears case, which presumably dealt with similar disallowances under Section 37(3A) concerning commission expenses. The operative direction is to answer the reference against the revenue.

What were the facts?

The Commissioner of Income Tax, Jalandhar (the revenue) has filed a reference before the High Court of Punjab and Haryana at Chandigarh, challenging an order passed by the Income Tax Appellate Tribunal (ITAT), Amritsar Bench. The ITAT's order, dated 2.11.1992, in ITA No.322(ASR)/1988, concerned the assessment year(s) not explicitly stated. The dispute revolves around the disallowance of expenses amounting to Rs.344,658/- paid as commission to selling agents. The revenue is aggrieved by the ITAT's decision to exclude these expenses from disallowance under Section 37(3A) of the Income Tax Act, 1961.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the learned ITAT is right in law in holding that expenses on account of commission paid to selling agents amounting to Rs.344,658/- are not to be taken into account for the purposes of disallowance under Section 37(3A) of the Income Tax Act? Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT's decision in favor of the assessee implies that the commission paid to selling agents was not disallowable under Section 37(3A). Revenue's Contention: The revenue, through the Commissioner of Income Tax, is challenging the ITAT's finding, arguing that the commission expenses should have been considered for disallowance under Section 37(3A). The revenue relies on the ITAT's order being incorrect in law.

Which sections of the Income-tax Act were involved?

Section 37(3A)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

**** I.T.R. No.583 of 1995 Date of Decision:13.11.2006 The Commissioner of Income Tax, Jalandhar .....Petitioner Vs. M/s Kakkar Complex Steel (P) Ltd., Jalandhar

.....Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present:- Dr. N.L.Sharda, Advocate for the petitioner. Mr. Sanjay Bansal, Advocate for the respondent. **** 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, Amritsar Bench, Amritsar in I.T.A. No.322(ASR)/1988 dated 2.11.1992:- “Whether on the facts and in the circumstances of the case the ld. ITAT is right in law in holding the expenses on account of commission paid to selling agents amounting to Rs.344658/- are not to be taken into account for the purposes of disallowance u/s 37(3A)of the I.T.Act?” (2002) 257 ITR 645 (P&H). Accordingly, following the judgment of this Court in Indo Asian Switchgears (P) Ltd. (supra), the question referred is answered against the revenue and in favour of the assessee.

( ADARSH KUMAR GOEL ) JUDGE November 13, 2006 ( RAJESH BINDAL ) renu JUDGE

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