CIT vs. RITA MECHANICAL WORKS

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ITR/228/1995HC Punjab & HaryanaPHHC01032285199505 November 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL1 pages
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What did the High Court hold?

The High Court, following the judgment of the Hon'ble Supreme Court in Allied Motors (P) Limited v. Commissioner of Income Tax, reported in 1997 (224) ITR 677, decided both issues against the revenue and in favour of the assessee. The Court had previously dealt with a similar matter in ITR No.94 of 1996, Commissioner of Income tax (C), Ludhiana v. M/s Avery Cycle Inds. Pvt. Limited, Ludhiana, vide its order dated September 5, 2006. Consequently, both questions of law referred by the ITAT were answered against the revenue and in favour of the assessee. The operative direction was to answer the questions as indicated, implying affirmation of the ITAT's order on these points.

What were the facts?

This case involves a reference of questions of law by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, to the High Court of Punjab and Haryana at Chandigarh. The reference arises from the ITAT's order dated November 10, 1994, concerning Income Tax Appeal No. 1392/Chandi/89 for the assessment year 1986-87. The applicant is the Commissioner of Income Tax (Central), Ludhiana, and the respondent is Rita Mechanical Works, Ludhiana. The dispute pertains to two specific issues decided by the ITAT, which the revenue sought to challenge.

What were the issues?

The High Court was asked to decide the following questions of law: 1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing investment allowance on tubewells, which is in reality a structure – a part of the building? This question concerns the allowability of investment allowance under the Income Tax Act, 1961, on assets classified as structures. 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that the first proviso to section 43B inserted w.e.f. 1.4.1988, has retrospective application and that the undischarged Sales-tax liability could not be disallowed u/s 43B, if paid before due date prescribed u/s 139(1)? This question relates to the retrospective application of the first proviso to Section 43B of the Income Tax Act, 1961, and its impact on the disallowance of sales-tax liability. Contentions: Assessee: The judgment does not record specific contentions for the assessee. Revenue: The revenue sought to challenge the ITAT's findings on both issues.

Which sections of the Income-tax Act were involved?

Section 43B,Section 139(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.R. No.228 of 1995 Date of decision: 06.11.2006 Commissioner of Income Tax (Central), Ludhiana. ---Applicant Vs. Rita Mechanical Works, Ludhiana. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE RAJESH BINDAL Present: Mr. S.K. Garg Narwana, Advocate for the revenue. -----

ORDER: Following questions of law have been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated 10.11.1994 in I.T.A. No.1392/Chandi/89 in respect of assessment year 1986-87:- “1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing investment allowance on tubewells, which is in reality a structure – a part of the building?

2.

Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that the first proviso to section 43B inserted w.e.f. 1.4.1988, has retrospective application and that the undischarged Sales-tax liability could not be disallowed u/s 43B, if paid before due date prescribed u/s 139(1)?” We find that the issue is covered against the revenue and in favour of the assessee by the judgment of Hon’ble Supreme Court in Allied Motors (P) Limited v. Commissioner of Income Tax

1997 (224) ITR 677. Following the above judgment of the Hon’ble Supreme Court, we have decided the issue against the revenue and in favour of the assessee vide our order dated 5.9.2006 in ITR No.94 of 1996, The Commissioner of Income tax (C), Ludhiana v. M/s Avery Cycle Inds. Pvt. Limited, Ludhiana..

Accordingly, the question is answered against the revenue and in favour of the assessee. ( ADARSH KUMAR GOEL ) JUDGE November 06, 2006 ( RAJESH BINDAL ) ashwani JUDGE

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