Commissioner Of Income Tax, Bhopal vs. M/S Heg Ltd.

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MAIT/81/2003HC Madhya Pradesh04 February 2026Author: HON'BLE SHRI JUSTICE VIVEK RUSIA3 pages
For Petitioner: Sanjay Tuli,Ajit AdeFor Respondent: Pratul Shandilya,A.Vohra,S.Singh,
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, not on merits, but based on Circular No. 5/2024. The Court noted that while the CIT considered contributions for AY 1992-93 to 1997-98, the ITAT's order pertained to AY 1997-98, with a net contribution of Rs. 11,70,373/-. The Court concluded that the tax effect in this appeal was quantifiable, and therefore, the appeal was liable to be dismissed under the said circular. The Court explicitly stated that the questions of law framed at the time of admission would remain open. No decision was made on the merits of the issues raised.

What were the facts?

The assessee, M/s HEG Ltd., a company manufacturing Carbon Electrodes, was assessed for Assessment Year 1997-98. The Assessing Officer allowed a deduction of Rs. 3,18,65,744/- as business expenditure for contributions made to the Graphite Export Development Trust. The Commissioner of Income Tax (CIT), Bhopal, invoked Section 263, holding the contribution to be an application of income, not business expenditure. The Income Tax Appellate Tribunal (ITAT) set aside the CIT's order. The Revenue appealed to the High Court against the ITAT's order. The ITAT had noted the net contribution to the trust for AY 1997-98 was Rs. 11,70,373/-. The High Court admitted the appeal on specific questions of law.

What were the issues?

1. Whether the ITAT was justified in law in holding that the assessment order dated 30.03.2000 passed by the Assessing Officer u/S 143(3) of the Income Tax Act, 1961 is neither erroneous nor prejudicial to the interest of revenue? 2. Whether the ITAT was justified in law in holding that invoking of the provisions of Section 263 by the Commissioner of Income tax is merely a change of opinion from that taken by the Assessing Officer because the Assessing Officer and the Commissioner of Income Tax are different authorities? 3. Whether the ITAT was justified in law in holding that the contribution of Rs.3,18,65,744/- made by the assessee to Graphite Export Development Trust is an eligible deduction from the total income of the assessee because such expenses were not incurred by the assessee wholly and exclusively for the purpose of business? Assessee's contentions: Not recorded. Revenue's contentions: Not explicitly recorded, but the appeal is based on challenging the ITAT's findings on the above issues. The Revenue relied on Circular No. 5/2024 dated 15th March, 2024, to argue that the appeal should be dismissed due to a quantifiable tax effect.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE VIVEK RUSIA & HON'BLE SHRI JUSTICE PRADEEP MITTAL ON THE 4th OF FEBRUARY, 2026 MISC. APPEAL (I.T.) No. 81 of 2003 COMMISSIONER OF INCOME TAX, BHOPAL Versus M/S HEG LTD. Appearance: Shri Harpreet Singh Gupta - Advocate for the appellant. Shri Sumit Nema -Senior Advocate with Shri Ayush Gupta-Advocate for respondent.

ORDER Per: Justice Vivek Rusia This appeal under section 260A of the Income Tax Act, 1961, has been filed against the order dated 27.05.2003 (Annexure A-3) passed by the Income Tax Appellate Tribunal, whereby the order passed under section 263 of the Income Tax by the Commissioner of Income Tax, Bhopal, dated 06.03.2002 (Annexure A-2) has been set aside.

2.

The facts of the case, in short, are as under:- (a) The respondent/Assessee is a company engaged in business activity of manufacturing and sale of Carbon Electrodes and the assessment order under section 143(3) of Income Tax Act, 1961 was passed by the Assessing Officer on 30.03.2000 (Annexure A-1) granting benefit of deduction for contribution of Rs.3,18,65,744/- to the Graphite Export Development Trust under the head of 1 MAIT-81-2003 NEUTRAL CITATION NO. 2026:MPHC-JBP:12779 "business expenditure". The matter was taken up under section 263 of the Income Tax by the Commissioner Income Tax, Bhopal and vide order dated 06.03.2002 (Annexure A-2), the Commissioner has held that the contributions made to such trust are in the nature of application of income and not in the nature of an expenditure incurred for business purposes and therefore, such contributions cannot be allowed as a business expenditure. (b) Being aggrieved by the order dated 06.03.2002, the Assessee approached the ITAT by way of ITA No.308/IND/2002. The learned Tribunal observed in the order that net contribution to the trust during the year relevant for the Assessment Year under consideration i.e 1997-98, worked out to Rs.11,70,373/-. However, the order passed by the CIT has been set aside. Hence, this appeal is before this Court. (c) Vide order dated 15.07.2004, this appeal was admitted on following question:-

1.

Whether the ITAT was justified in law in holding that the assessment order dated 30.3.2000 passed by the Assessing Officer u/S 143(3) of the Income Tax Act, 1961 is neither erroneous nor prejudicial to the interest of revenue" ? 2. “Whether the ITAT was justified in law in holding that invoking of the provisions of Section 263 by the Commissioner of Income tax is merely a change of opinion from that taken by the Assessing Officer because the Assessing Officer and the Commissioner of Income Tax are different authorities"? 3. “Whether the ITAT was justified in law in holding that the contribution of Rs.3,18,65,744/ made by the assesses to Graphite Export Development Trust is an eligible deduction from the total income of the assesses because such expenses were not incurred by the assesses wholly and exclusively for the purpose of business" ? (d) This matter came up for hearing on 03.03.2020 and counsel for the appellant sought time to apprise this Court regarding the tax effect involved in this appeal.

3.

Learned counsel for the appellant submits that since this is a matter of 2 MAIT-81-2003 NEUTRAL CITATION NO. 2026:MPHC-JBP:12779 (VIVEK RUSIA) JUDGE (PRADEEP MITTAL) JUDGE under section 263 of the Income Tax Act, the tax effect is not liable to be seen by virtue of clause 3.1(f) vide Circular No.5/2024 dated 15th March, 2024. The Clause 3.1(f) is reproduced as under:- "3.1(f) Where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under sections 10 (23C), 12A/12AA/12AB of the Act, order passed under section 263 of the Act etc. The reference to cases involving sections referred here, where it is not possible to quantify tax effect or tax effect is not involved, is for the purpose of illustration only."

4.

As per the aforesaid clause, where tax effect is not quantifiable or not involved, such as the cases of registration of trusts or institutions, an order passed under section 263 of the Act, etc. The monetary limits given in paragraph-4 with regard to filing appeals/SLPs, shall not be applicable. In this case, the assessment year is 1997-98 as observed by the learned ITAT. The total contribution is Rs. 11,70,373/-; therefore, the tax effect would be much lower than the limit. In the Assessment order also the contribution was permitted to be deducted only for the Assessment Year 1997-98. The learned CIT vide order dated 06.03.2002 (Annexure A-2) considered deduction of contribution of Rs.3,18,65,744/- for the Assessment Year 1992-93 to 1997-98, except 1997-98 assesment of other financial year are not under consideration before this Court; therefore, the tax effect involved in this appeal is quantifiable; therefore, this appeal is liable to be dismissed under circular No.5/2024 dated 15th March, 2024. Accordingly, this appeal is dismissed. However, the questions of law framed by this Court shall remain open. tarun

3 MAIT-81-2003 NEUTRAL CITATION NO. 2026:MPHC-JBP:12779

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