C.I.T. vs. CADILA ANTIBIOTICS LTD.

O/ITR/23/2003 JUDGMENT

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE NO. 23 of 2003 With INCOME TAX REFERENCE NO. 24 of 2003

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI Sd/-

and HONOURABLE MR.JUSTICE K.J.THAKER Sd/-

================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 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 ? No 5 Whether it is to be circulated to the civil judge ? No ================================================================ C.I.T.....Applicant(s) Versus CADILA ANTIBIOTICS LTD.....Respondent(s) ================================================================ Appearance: MR MR BHATT, Ld. SENIOR COUNSEL with MRS MAUNA M BHATT, ADVOCATE for the Applicant(s) No. 1 MR RK PATEL, ADVOCATE for the Respondent(s) No. 1 Page 1 of 5

O/ITR/23/2003 JUDGMENT ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER

Date : 16/10/2014

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.By way of these References, the following point was referred to the Income Tax Appellate Tribunal, Ahmedabad Bench 'B' for consideration :- “Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee was entitled to deduction under section 32-AB of the Income-tax Act, 1961? 2.Learned Senior Counsel for the appellant has drawn our attention to Section 32AB of the Income Tax Act which reads as under :- “32AB. (1) Subject to the other provisions this section, where an assessee whose total income includes income chargeable to tax under the head “Profits and gains of business or profession”, has, out of such income, - (a) deposited any amount in an account (hereafter int his section referred to as deposit account) maintained

him

with

the Page 2 of 5

O/ITR/23/2003 JUDGMENT Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income, whichever is earlier; or (b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery or plant, without depositing any amount in the deposit account under clause (a),” 3.Learned Senior Counsel also drew the attention of the Court to the decision rendered by the Patna High Court in the case of Commissioner of Income-Tax v. Chanchani Brothers (Contractors) Pvt. Ltd. reported in 161 Income Tax Reports 418. The relevant part (Head Note) of the decision reads as under :- “Though under the mercantile system of accounting all items of credit into credit immediately they become legally due and before they are actually

received,

and

all expenditure is debited, for which a legal liability has been incurred before it is actually disbursed, yet before a credit or debit entry can legitimately be made in the accounts, it must be shown that a certain enforceable liability has accrued or arisen and that such liability must be one that has been ascertained and capable of being enforced by the person in whose favour the debit has been raised.” Page 3 of 5

O/ITR/23/2003 JUDGMENT 4.Learned Senior Counsel also pointed to the Scheme of the Act as also to Sub-Clause 4, i.e. Manner of Deposit which reads as under :- “(3) Every subsequent deposit shall be made into the deposit Office at which the account stands by crossed cheque or demand draft drawn in favour of such office at a bank situated at the place where the deposit office is situated” (Emphasis given).” Learned Senior Counsel therefore, contended that from the records it is clear that the amount was deposited in the account of IDBI Bank on 25.09.1989. In view of provisions of Section 32AB of the Act, it is required to be debited within six months from the end of the financial year or/and on 30th SEPTEMBER of the next financial year. 5.However, learned Senior Counsel for the appellant was not in a position to show that the amount was not debited on 30th SEPTEMBER from the account of the assessee. 6.In the aforesaid circumstances, we are of the view that both the References are answered accordingly in favour of the Assessee and against the Revenue. Sd/- Page 4 of 5

O/ITR/23/2003 JUDGMENT (K.S. JHAVERI, J.) Sd/- (K.J. THAKER, J) CAROLINE Page 5 of 5