COMMISSIONER OF INCOME TAX-II vs. M/S M RAVJI OIL INDUSTRIES LTD

O/TAXAP/767/2009 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 767 of 2009

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH

and HONOURABLE MR.JUSTICE R.D.KOTHARI

============================================= 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-II....Appellant(s) Versus M/S M RAVJI OIL INDUSTRIES LTD....Opponent(s) ============================================= Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 SERVED BY AFFIX.-(R) for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.D.KOTHARI

Date : 21/12/2013

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) Page 1 of 4

O/TAXAP/767/2009 JUDGMENT 1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.02.2008 passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'the ITAT') in ITA No.3748/Ahd/2002 for the Assessment Year 1991-1992, the Revenue has preferred present tax appeal to consider the following substantial question of law: “Whether the Appellate Tribunal is right in law and on facts in dismissing the Tax Appeal of the revenue on the ground of low tax effect, though the notional tax effect exceeded the monetary limit prescribed by the board?” 2. Heard Ms Mauna Bhatt, learned advocate appearing on behalf of the Revenue. Though served, nobody appears on behalf of the respondent. 3. Learned counsel appearing on behalf of the revenue has vehemently submitted that by impugned order the learned Tribunal has dismissed the appeal without entering into the merits, on the premises that being loss declared by the assessee, there would be only notional tax effect. It is submitted that appropriate computation loss would be necessary and may have relevance, if in, subsequent years, the assessee declares profits. It is submitted that in the present case the amount involved is in excess of the limit laid down in the circular prevailing at the relevant time. It is submitted that while dismissing the appeal solely on the ground of low tax effect, the learned Tribunal has not appreciated and / or considered the fact that the notional tax effect would exceed the monetary limit prescribed by the Page 2 of 4

O/TAXAP/767/2009 JUDGMENT Board. Learned counsel appearing on behalf of the revenue has submitted that as such the question raised in the present appeal is squarely covered by the decision of this Court in Tax Appeal No.1601 of 2003 and other allied appeals as well as recent decision of this Court in Tax Appeal No. 735 of 2013 and other allied matters. Making above submissions and relying upon the above decisions, it is requested to quash and set aside the impugned order passed by the learned ITAT and remand the matter to the learned Tribunal to decide the said appeal afresh in accordance with law and on merits. 4. Heard learned advocate for the revenue and considered the impugned order passed by the learned Tribunal. It appears that by impugned order the learned ITAT has dismissed the appeal solely on the ground of low tax effect and on the ground that the amount of tax involved is below monetary limits prescribed by the Board. While dismissing the appeal, learned ITAT has not entered into the merits of the case at all and has dismissed the appeal solely on the aforesaid ground. However, learned ITAT has not properly appreciated the fact that appropriate computation of law should be necessary and may have relevance, if in subsequent years, the assessee declares profits. It is the case on behalf of the revenue that if the aforesaid would have been considered, the amount involved in the appeal is in excess of limit laid down in the circular prevailing at the relevant time. 5. Identical question came to be considered by the Division Bench of this Court in Tax Appeal No.1601 of 2009 and other allied appeals and the Division Bench considered the same / similar substantial question of law, which reads as follows; Page 3 of 4

O/TAXAP/767/2009 JUDGMENT “Whether the appellate tribunal is right in law and on facts in dismissing the tax appeal of the revenue on the ground of low tax effect, though the notional tax effect exceeded the monetary limit prescribed by the Board?” 6. The aforesaid decision of this Court in Tax Appeal No.1601 of 2009 has been subsequently considered and followed by this Court in recent decision in Tax Appeal No. 735 of 2013 and other appeals. 6.1. In view of the aforesaid decision of the Division Bench in Tax Appeal No. 1601 of 2009 and other allied appeals and recent decision of this Court in Tax Appeal No. 735 of 2013 and other allied appeals, the present appeal is required to be allowed and the impugned order passed by the learned ITAT under challenge is required to be quashed and set aside and the appeal is required to be remanded to the learned ITAT to decide the same on merits. 7. In the result, the present tax appeal is allowed. The impugned order of the Tribunal dismissing the appeal is hereby quashed and set aside and the appeal is remanded to the learned ITAT to decide the same on merits and issue arising in the appeal to be decided in accordance with law after issuing notice to the assessee. The appeal is, accordingly, allowed to the aforesaid extent. No costs. (M.R.SHAH, J.) (R.D.KOTHARI, J.) Jani Page 4 of 4