C.I.T. PATIALA vs. M/S MOUNT SHIVALIK BREWERIES LTD.

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ITR/154/1995HC Punjab & HaryanaPHHC01032211199506 November 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL3 pages
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What did the High Court hold?

The High Court addressed the referred questions of law. For Question Nos. 1 and 3 (RA No.237/Chandi/94) and the sole question in RA No.238/Chandi/94, the Court held that these were covered against the assessee by the Supreme Court's judgment in Britannia Industries Limited v. CIT and another, (2005) 278 ITR 546. This judgment was also followed in the assessee's own case for assessment year 1981-82. Therefore, these questions were answered in favour of the revenue and against the assessee. For Question No. 2 (RA No.237/Chandi/94), the Court found it to be covered in favour of the assessee and against the revenue by the Supreme Court's judgment in Allied Motors (P) Limited v. CIT, (1997) 224 ITR 677. Consequently, this question was answered in favour of the assessee and against the revenue. The references were disposed of accordingly.

What were the facts?

The Commissioner of Income Tax, Patiala (Revenue) has filed these Income Tax References (ITR Nos. 154 and 155 of 1995) before the High Court of Punjab and Haryana at Chandigarh. The references arise from an order dated 16.6.1994 passed by the Income Tax Appellate Tribunal, Chandigarh Bench, in ITA Nos. 407, 538, and 828/Chandi/89. The assessment years under consideration are 1984-85 and 1985-86. The references pertain to questions of law concerning the allowability of certain expenses and liabilities. The High Court heard arguments from counsel for both the revenue and the assessee, M/s. Mount Shivalik Breweries Limited.

What were the issues?

The Tribunal has referred the following questions of law for the opinion of the High Court: 1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing rent paid for hiring a guest house, holding that the expenditure is covered by the Income Tax Act, 1961? (Section 37) 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in upholding the order of the CIT(A) directing the Assessing Officer to allow sales tax liability of Rs. 3,21,680/- if it was paid before the due date of filing the return under section 139(1) for assessment year 1984-85, when the first proviso to section 43B of the Act was inserted w.e.f. 1.4.1988? (Section 43B) 3. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in upholding the order of the CIT(A) deleting the disallowance made under section 37(3A) in respect of expenses incurred on motor car repairs, holding that the expenditure was covered under section 31 and not hit by the provisions of section 37(3A)? (Section 37(3A), Section 31) Assessee's Contentions: The judgment does not explicitly record the assessee's contentions for each issue. The High Court's decision implies the assessee argued for the allowability of the guest house rent and motor car repair expenses, and the deductibility of sales tax liability. The assessee would have relied on the CIT(A)'s and ITAT's findings. Revenue's Contentions: The revenue, through its counsel, argued that the ITAT erred in allowing the guest house rent and motor car repair expenses, and in directing the allowance of sales tax liability under the specified conditions, likely contending that these expenses/liabilities were not deductible or were hit by specific disallowance provisions.

Which sections of the Income-tax Act were involved?

Section 37,Section 43B,Section 37(3A),Section 31,Section 139(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
ITR Nos.154 and 155 of 1995 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR Nos. 154 and 155 of 1995 Date of decision:15.11.2006 The Commissioner of Income Tax, Patiala ....Petitioner versus M/s. Mount Shivalik Breweries Limited, Bhankarpur ....Respondent CORAM: HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present: Dr. NL Sharda, Advocate, for the revenue. Mr. SK Mukhi, 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 16.6.1994 in ITA Nos.407, 538 and 828/Chandi/89, for the assessment years 1984-85 and 1985-86:- Questions in RA No.237/Chandi/94 “1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing rent paid for hiring guest house holding that the expenditure is covered by Income tax Act, 1961?”

2.

Whether, on the facts and in the circumstances of the case, the ITAT was right in law in upholding the order of CIT(A) directing the Assessing Officer to allow sales tax liability of Rs.3,21,680/- if it was paid before the due date of filing the return under section 139(1) for assessment year 1984-85 when first proviso to section 43B of the Act was inserted w.e.f 1.4.1988?”

3.

Whether on the facts and in the circumstances of the case, the ITAT was right in law in upholding the order of CIT(A) deleting the disallowance made under section 37 (3A) in respect of expenses incurred on Motor cars repairs holding that the expenditure was covered under section 31 and not hit by the provisions of section 37 (3A)?

Question in RA No.238/chandi/94 “Whether, on the facts and in the circumstances of the case, the ITAT was right in law in upholding the order of the ld. CIT(A) deleting the disallowance made under section 37(3A) in respect of expenses incurred on Motor car repairs and insurance holding that the expenditure was covered under section 31 and not hit by the provisions of section 37(3A)?

We have heard learned counsel for the parties and perused the findings recorded. We find that Question Nos.1 and 3 in RA No.237/Chandi/94 and the only question in RA No.238/Chandi/94 are covered against the assessee by judgment of the Hon'ble Supreme Court in Britannia Industries Limited v. CIT and another, (2005) 278 ITR 546, which has been also followed in the case of the assessee for the assessment year 1981- 82 vide our judgment dated 15.9.2006 in ITR No.62 of 1991, M/s Mount Shivalik Breweries Limited, Village Bhankarpur, District Patiala v. The CIT, Patiala). We find that question No.2 in RA No.237/chandi/94 is covered against the revenue and in favour of the assessee, in view of judgment of the Hon'ble Supreme Court in Allied Motors (P) Limited v. CIT, (1997) 224 ITR 677. Accordingly, question Nos.1 and 3 in RA no.237/Chandi/94 and the only question in RA No.238/chandi/94 are answered in favour of the revenue and against the assessee, while question No.2 in RA No.237/Chandi/94 is answered in favour of the assessee and against the revenue. Reference is disposed of accordingly. (Adarsh Kumar Goel) Judge November 15, 2006 (Rajesh Bindal) 'gs' Judge

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