COMMISSIONER OF INCOME-TAX vs. SHREE RAMDEV SILK MILLS

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ITR/350/1984HC GujaratGJHC24012015198430 August 1999Bench: HONOURABLE MR. JUSTICE C.K.THAKKER,HONOURABLE MR. JUSTICE A.L.DAVE3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the question referred to it must be answered in favour of the revenue and against the assessee, following its previous decision in Income Tax Reference No. 241 of 1984, which in turn relied on Commissioner of Income Tax, Baroda v. M/s Yoganand Textiles. The ratio decidendi is that payments to partners as 'Majuri' are disallowable under Section 40(b) of the Income-tax Act, 1961. However, the Court clarified that, as in the Yoganand Textiles case, the genuineness of the expenditure alleged to have been incurred by the partners to whom these amounts were paid will have to be examined. This specific aspect was not examined by the Commissioner of Income Tax or the Income Tax Appellate Tribunal. The reference was disposed of accordingly, with no order as to costs.

What were the facts?

This case concerns an Income Tax Reference before the High Court of Gujarat at Ahmedabad. The reference was made by the Income Tax Appellate Tribunal concerning Assessment Year(s) not explicitly stated. The Commissioner of Income-tax is the petitioner, and Shree Ramdev Silk Mills is the respondent. The core issue revolves around the disallowability of 'Majuri' payments made to the partners of the assessee firm. The Court was invited to consider a previous decision in Income Tax Reference No. 241 of 1984, which dealt with a similar question regarding the disallowability of 'Majuri' payments under Section 40(b) of the Income-tax Act, 1961.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the amounts paid as Majuri payments to the partners of the assessee were not disallowable under section 40(b) of the Income-tax Act, 1961? (Question of law) The Assessee's contention is not recorded in the judgment. The Revenue's contention, as implied by the Court's reliance on previous judgments, is that the 'Majuri' payments to partners should be disallowed under Section 40(b) of the Income-tax Act, 1961. The Court referred to its prior decision in Income Tax Reference No. 241 of 1984 and a case titled Commissioner of Income Tax, Baroda v. M/s Yoganand Textiles, 202 I.T.R. 869.

Which sections of the Income-tax Act were involved?

Section 40(b)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 350 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE C.K.THAKKER and MR.JUSTICE A.L.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO

-------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus SHREE RAMDEV SILK MILLS -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner MR KC PATEL for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE C.K.THAKKER and MR.JUSTICE A.L.DAVE Date of decision: 30/08/1999

ORAL JUDGEMENT 1. The following question was referred for the opinion of this Court :-

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the amounts paid as

Majuri payments to the partners of the assessee were not disallowable under section 40(b) of the Income-tax Act, 1961."

2.

At the time of hearing, our attention was invited to a decision in Income Tax Reference No.241 of 1984, dated September 20, 1991. In the said case, the question which was referred by the Tribunal for the opinion of this Court read as under :-

"Whether, on the facts and in the circumstances of the case, the tribunal was right in law in coming to the conclusion that the amounts paid as Majuri payments to the partners of the assessee firm were not disallowable under section 40(b) of the Income-tax Act, 1961?"

3.

Relying on a decision in Commissioner of Income Tax, Baroda v. M/s Yoganand Textiles, 202 I.T.R. 869, the question was answered in favour of the revenue and against the assessee. Accordingly in I.T.R. No. 241 of 1984 also, the question was answered in favour of the revenue and against the assessee.

In the last paragraph of the order, however, the Court stated;

"We may, however, make it clear that, as in the case of CIT vs. M/s Yoganand Textiles, the question, whether expenditure alleged to have been incurred by the partner who have been paid the amounts in question, is genuine or not, will have to be examined since neither the Commissioner of Income Tax nor the Income Tax Appellate Tribunal has examined this question. The question referred to us has been answered as stated above subject to this clarification."

4.

Since the point is concluded by a decision of this Court, in the instant case also, the question must be answered in favour of the revenue and against the assessee. It is, however, made clear, as has been made clear in the case of Yoganand Textiles, that the question whether the expenditure alleged to have been incurred by the partners who have been paid the amounts in question is genuine or not, will have to be examined since the said question was neither examined by the Commissioner of Income Tax nor by the Income Tax Appellate Tribunal.

5.

Reference is disposed of accordingly. In the facts and circumstances of the case, no order as to

costs.

[ C.K. THAKKAR, J. ]

[ A.L. DAVE, J. ] gt

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