COMMISSIONER OF INCOME TAX vs. MIHIR TEXTILELTD

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ITR/119/1986HC GujaratGJHC24010743198610 September 2001Bench: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Tribunal had erred in law in concluding that the CIT's order under Section 263 was without jurisdiction. This was based on a previous judgment of the same court in ITR No. 120 of 1986. The court reasoned that an assessment order made after receiving directions under Section 144B from the IAC does not cease to be an order framed by the ITO. Therefore, issues 1 and 2 were answered in favour of the Revenue and against the assessee. Regarding the third issue, concerning the deferred annuity policy, the court followed its decision in Gujarat Steel Tubes Ltd. vs. CIT (210 ITR 358), holding that the premium paid for a deferred annuity policy is capital expenditure and not allowable under Section 37 of the Act. Thus, issue 3 was answered in favour of the Revenue and against the assessee. The reference was disposed of accordingly.

What were the facts?

This case concerns an Income Tax Reference before the High Court of Gujarat. The reference was made at the instance of the Commissioner of Income Tax (Revenue) and the assessee, Mihir Textile Ltd. The core of the dispute revolves around the jurisdiction of the Commissioner of Income Tax (CIT) to revise an order passed under Section 263 of the Income Tax Act, 1961, when the original assessment order was made under Section 144B of the Act. Additionally, the nature of expenditure for a deferred annuity policy was questioned. The High Court was asked to opine on three specific questions referred to it.

What were the issues?

The Tribunal had to decide three questions: 1. Whether the Tribunal erred in law and fact in holding that the CIT's order under Section 263 was without jurisdiction because the Income Tax Officer's (ITO) order was made under Section 144B of the Income Tax Act, 1961. 2. Whether the CIT has no jurisdiction to take proceedings under Section 263 if the assessment order was made under Section 144B by the Inspecting Assistant Commissioner (IAC) with the concurrence of the ITO's direction. 3. Whether, on the facts, the Tribunal was right in law in holding that the payment of premium for a deferred annuity policy was not in the nature of revenue expenditure. For issues 1 and 2, the Revenue contended that the CIT had jurisdiction. For issue 3, the Assessee contended that the premium payment was revenue expenditure. The judgment notes that no one appeared for the assessee for the third issue.

Which sections of the Income-tax Act were involved?

Section 263,Section 144B,Section 37

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 119 of 1986

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 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 MIHIR TEXTILE LTD -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 119 of 1986 MR BB NAIK with MR MANISH R BHATT for Petitioner No. 1 NOTICE SERVED for Respondent No. 1

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

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE D.A.MEHTA

Date of decision: 12/09/2001

ORAL JUDGEMENT (Per : MR.JUSTICE D.A.MEHTA)

The following three questions have been referred to us for opinion:-

(i) Whether the Tribunal has not erred in law and on facts in holding that the order of the CIT made under section 263 of the Income Tax Act, 1961 was without jurisdiction as the order of the ITO was made under section 144B of the Income Tax Act, 1961 ?

(ii) Whether, the CIT has no jurisdiction to take proceedings under sec. 263 of the Income Tax Act, 1961 if the order was made under sec. 144B of the Income Tax Act, 1961, by the Inspecting Asstt. Commissioner by the ITO with the concurrence of IAC's direction ?

(iii) Whether on the facts the Tribunal was right in law in holding that payment of premium for deferred annuity policy was not in the nature of revenue expenditure ?

2.

The first two questions which have been referred to us at the instance of revenue are now concluded by unreported judgment of this Court in ITR No.120 of 1986 dated 9-7-2001. For the reasons stated in the said judgment, we hold that the Tribunal had erred in law in holding that the order made by CIT u/s.263 of the Income Tax Act, 1961 was made without jurisdiction as the assessment order made by the I.T.O. was under section 144B of the Act. In the earlier decision, this Court has specifically held that merely because the assessment order is made after receipt of directions u/s.144 B from the Inspecting Assistant Commissioner it does not cease to be an assessment order framed by the Income Tax Officer.

3.

The two questions referred to us at the instance of the Commissioner are, therefore, answered in the negative i.e. in favour of the revenue and against the assessee.

4.

The third question has been referred at the instance of the assessee. Though served, none has appeared on behalf of the assessee.

The said question is also concluded by decision of this Court in the case of Gujarat Steel Tubes Ltd. vs. CIT 210 ITR 358. It has been held that the amount paid as premium for acquiring deferred annuity policy is in the nature of a capital expenditure and is not allowable

under sec. 37 of the Act. Question No.3 is, therefore, answered following the aforesaid decision in the affirmative i.e. in favour of the revenue and against the assessee.

5.

The Reference stands disposed of accordingly with no order as to costs.

(M.S. Shah,J)

(D.A. Mehta,J)

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