COMMISSIONER OF I.T. (CENTRAL)LDH. vs. M/S HERO CYLES LTD. LDH.

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ITA/192/2001HC Punjab & HaryanaPHHC01042027200130 January 2015Bench: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE MAHABIR SINGH SINDHU2 pages
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What did the High Court hold?

The High Court addressed the two substantial questions of law separately. For the first question, concerning the addition on account of closing stock of stores, spare parts, and tools, the Court held in favour of the Revenue and against the assessee. This decision was based on a separate order of the same date in ITA No.68 of 2001, Commissioner of Income Tax (Central), Ludhiana Vs. M/s Highway Cycle Industries Ltd., for the same reasons recorded therein. For the second question, regarding the expenditure on gift items, the Court held in favour of the assessee and against the Revenue. This decision was covered by the High Court's previous judgment in Commissioner of Income Tax Vs. Avon Cycles Ltd. (2008) 303 ITR 345. Consequently, the appeal was partly allowed.

What were the facts?

The Revenue, Commissioner of Income Tax (Central), Ludhiana, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, dated 23.11.2000. The appeal pertained to assessment year 1989-90 and involved two substantial questions of law. The first question concerned the deletion of an addition of Rs.34,79,900/- made on account of closing stock of stores, spare parts, and tools. The second question related to the deductibility of Rs.4,75,816/- spent on gift items distributed to dealers as business expenditure. The High Court of Punjab and Haryana at Chandigarh heard the appeal.

What were the issues?

The Tribunal had to decide two substantial questions of law: 1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in confirming the deletion of the addition of Rs.34,79,900/- made on account of closing stock of stores, spare parts, and tools, as per Section 2(47) and Section 145 of the Income Tax Act, 1961. 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding the amount of Rs.4,75,816/- spent on gift items like shawls, watches, tea-sets, and other miscellaneous items distributed amongst dealers as business expenditure, as per Section 37(1) of the Income Tax Act, 1961. Assessee's Contentions: The judgment does not record specific contentions for the assessee on these issues. Revenue's Contentions: The Revenue argued that the ITAT erred in deleting the addition related to closing stock and in allowing the expenditure on gift items as business expenditure.

Which sections of the Income-tax Act were involved?

Section 260A,Section 2(47),Section 145,Section 37(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT

CHANDIGARH Date of Decision: 30.01.2015 I.T.A.No.192 of 2001 Commissioner of Income Tax (Central), Ludhiana ...Appellant Versus M/s Hero Cycles Ltd., Ludhiana

...Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA

HON'BLE MR. JUSTICE HARI PAL VERMA 1. Whether Reporters of local papers may be allowed to see the judgment?

2.

To be referred to the Reporters or not?

3.

Whether the judgment should be reported in the Digest? Present : Ms. Savita Saxena, Advocate, for the appellant.

Mr. Aalok Mittal, Advocate, for the respondent.

HEMANT GUPTA, J. (ORAL)

The Revenue is in appeal under Section 260 A of the Income Tax Act, 1961 (for short ‘the Act’) aggrieved against the order passed by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short ‘the Tribunal’) on 23.11.2000 relating to the assessment year 1989-90. The Revenue - appellant has raised the following substantial questions of law: (i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming the order of the ld. CIT (A) in deleting the addition of Rs.34,79,900/- made on account of closing stock of stores, spare-partes and tools etc.? (ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding the amount of Rs.4,75,816/- spent on Gift-items like shawls, watches, tea-sets and other misc. items distributed amongst the dealers as business expenditure? VIMAL KUMAR 2015.02.02 16:20 I attest to the accuracy and integrity of this document Chandigarh

ITA No.192 of 2001

The first substantial question of law has been answered in favour of the Revenue and against the assessee vide separate order of today rendered in I.T.A.No.68 of 2001 titled ‘Commissioner of Income Tax (Central), Ludhiana Vs. M/s Highway Cycle Industries Ltd.’ The said question is, thus, answered in favour of the revenue for the same reasons as are recorded therein.

Now coming to the second substantial question of law, the same is covered by the judgment of this Court in Commissioner of Income Tax Vs. Avon Cycles Ltd. (2008) 303 ITR 345.

Consequently, while answering the first substantial question of law in favour of the appellant – Revenue and second substantial question of law in favour of the respondent – assessee, the present appeal is partly allowed.

(HEMANT GUPTA)

JUDGE

30.01.2015

(HARI PAL VERMA)

Vimal

JUDGE VIMAL KUMAR 2015.02.02 16:20 I attest to the accuracy and integrity of this document Chandigarh

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