COMMISSIONER OF INCOME TAX vs. MEHSANA DIST.CO-OP.MILK PRODU-CERS' UNION LTD.
What did the High Court hold?
The High Court held that the questions referred to it were concluded between the parties due to a prior decision of a Division Bench of the same court in the case of Commissioner of Income-Tax vs. Mehsana District Co-operative Milk Producers Union Ltd., reported in [2006] 282 I.T.R. 24. This earlier judgment dealt with a similar dispute for Assessment Year 1984-85, concerning the deletion of an addition of Rs. 5,47,69,105/- representing alleged additional price towards the purchase price of milk sanctioned on the last day of the accounting year. The Division Bench had held that the Tribunal was right in law in deleting the addition by way of disallowance of the additional purchase price of milk sanctioned by the Board of Directors on the last day of the accounting year. Consequently, the High Court found itself unable to take a view contrary to its own prior judgment. The questions referred to the court were answered against the interest of the Revenue, and all three references were disposed of accordingly. No costs were awarded.
What were the facts?
The assessee, Mehsana District Cooperative Milk Producers Union Ltd., is in appeal against orders of the Income Tax Appellate Tribunal (ITAT) concerning Assessment Years (AY) 1986-87, 1985-86, and 1988-89. The Revenue has filed references to the High Court challenging the ITAT's deletion of additions made to the assessee's income. These additions represented alleged additional price of milk. For AY 1986-87, the addition was Rs. 8,86,59,662/-. For AY 1985-86, the claim allowed was Rs. 8,10,15,754/-. For AY 1988-89, the addition deleted was Rs. 4,63,57,027/-. A similar dispute for AY 1984-85, involving an addition of Rs. 5,47,69,105/-, was also referred to the High Court.
What were the issues?
The High Court was asked to decide three questions of law, all arising from references made by the Revenue at the instance of the ITAT: 1. **AY 1986-87:** Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 8,86,59,662/- representing alleged additional price of milk on 31-3-1986? 2. **AY 1985-86:** Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to allow the claim of Rs. 8,10,15,754/- claimed to have been representing additional price on milk? 3. **AY 1988-89:** Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) deleting the addition to the extent of Rs. 4,63,57,027/- being the alleged additional price towards purchase of milk sanctioned on the last day of the accounting year? **Assessee's Contentions:** The judgment does not explicitly record the assessee's arguments. However, the fact that the ITAT directed deletion of additions and allowed claims implies the assessee contended that the additional price was a legitimate business expense or accrual. The assessee likely relied on the Board of Directors' sanction for this additional price. **Revenue's Contentions:** The Revenue's references indicate their contention that the additional price of milk was not a genuine expenditure or accrual, and therefore, the ITAT erred in deleting the additions made by the Assessing Officer.
Which sections of the Income-tax Act were involved?
Section-256 (1)
AI-generated summary — verify with the full judgment below
ITR/70/1996 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE NO. 70 OF 1996 With INCOME TAX REFERENCE NO. 133 OF 1996 With INCOME TAX REFERENCE NO. 56 OF 1999 For Approval and Signature: HONOURABLE MR.JUSTICE R.S.GARG
HONOURABLE MR.JUSTICE M.R. SHAH ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the Civil Judge? ========================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus MEHSANA DIST.CO-OP.MILK PRODUCERS UNION LTD.-Opponent(s) ========================================================= Appearance : MRS. MONA BHATT for MR. MANISH R. BHATT for Applicant(s). MR. MANISH J. SHAH for Opponent(s). ========================================================= CORAM : HONOURABLE MR.JUSTICE R.S.GARG and HONOURABLE MR.JUSTICE M.R. SHAH Date : 30/08/2006 COMMON ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE R.S.GARG) This judgement shall dispose of I.T.R. No.70 of
ITR/70/1996 2/5 JUDGMENT 1996, I.T.R No.133 of 1996 and I.T.R. No.56 of 1999. 2. So far as I.T.R. No.70 of 1996 is concerned, at the instance of the Revenue, the Income Tax Appellate Tribunal, Ahmedabad Bench “C”, has referred the following question, arising out of I.T.A. No. 741/Ahd/1991 relating to Assessment Year 1986-87, for the opinion of this Court: “Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.8,86,59,662/-
representing
alleged additional price of milk on 31-3-1986?”
I.T.R. No.133 of 1996 is a Reference by the Income Tax Appellate Tribunal, Ahmedabad Bench “B” on the following question, arising out of I.T.A. No. 448/Ahd/1991 relating to Assessment Year 1985-86, for the opinion of this Court: “Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to allow the claim of Rs.8,10,15,754/- claimed to have been representing additional price on milk?” 4. I.T.R. No.56 of 1999 is in relation to Assessment Year 1988-89 wherein the following question,
ITR/70/1996 3/5 JUDGMENT arising out of I.T.A. No.444/Ahd/1992, has been referred to this Court for its opinion: “Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) deleting the addition to the extent of
Rs.4,63,57,027/-
being
the
alleged additional price towards purchase of milk sanctioned on the last day of the accounting year?” 5. It is to be noted that M/s.Mehsana District Cooperative Milk Producers Union Ltd. is the Assessee in all the three References. In relation to Assessment Year 1984-85, an identical dispute arose between the parties and at the instance of the Revenue, the Income Tax Appellate Tribunal, Ahmedabad Bench “B” referred the following question under Section-256 (1) of the Income Tax Act, 1961 for the opinion of this Court: “Whether, the Appellate Tribunal is right in law and on facts in deleting the addition to the extent of Rs.5,47,69,105/- being the alleged additional price towards purchase price of milk, sanctioned on the last day of the accounting year, i.e., March 31, 1984?”
ITR/70/1996 4/5 JUDGMENT In the said matter, the Tribunal had agreed to the contentions raised by the Assessee and directed that the addition of the above referred amount was required to be deleted. The matter was pertaining to Assessment Year 1984-85 and at the instance of the Revenue, a reference was made. In relation to the subsequent years, the Tribunal relied upon its order which it had passed in relation to the Assessment Year 1984-85. When the References were made, the Reference in relation to the Assessment Year 1984-85 was pending consideration before this Court. The said Income Tax Reference No.26 of 1993 has been finally disposed of by a Division Bench of this Court, the said judgement is reported in [2006] 282 I.T.R. 24 (Commissioner of Income-Tax vs. Mehsana District Co-operative Milk Producers Union Ltd.). The High Court, after referring to the legal position, observed that the Tribunal was right in law in deleting the addition by way of disallowance of additional purchase price towards purchase of milk, sanctioned by the Board of Directors on the last day of the Accounting Year. 6. As the question stands concluded between the parties, we are unable to take any view contrary to the view taken by the Division Bench of this Court in the
ITR/70/1996 5/5 JUDGMENT matter of the very same Assessee. The questions referred to this Court are answered against the interest of the Revenue. All the three References stand disposed of. No costs. [R.S.Garg, J.] [M. R. Shah, J.] kamlesh*
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