C.I.T. vs. M/s M.G.F. (India) Ltd.

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ITA/62/2000HC Delhi12 January 20152 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal was not maintainable due to a low tax effect, as per CBDT instructions. The court did not decide on the merits of whether the insurance premium was a trading receipt.

What were the facts?

The assessee, engaged in vehicle financing, collected insurance premiums from hirers and insured the vehicles. A surplus from these premiums was credited to a separate account. The Assessing Officer sought to tax this surplus under Section 41(1).

What were the issues?

The primary issue was the maintainability of the appeal based on the tax effect. The underlying issue was whether the insurance premium collected by the assessee constituted a trading receipt.

Which sections of the Income-tax Act were involved?

Section 41(1)

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ITA 62/2000 Page 1

$~R-5 * IN THE HIGH COURT OF DELHI AT NEW DELHI

Decided on: 12.01.2015 +

ITA 62/2000

C.I.T.

..... Appellant

Through: Mr. Rohit Madan, Adv.

versus

M/s M.G.F. (India) Ltd.

..... Respondent Through: None.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.K.GAUBA

MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)

1.

In the present case the following question of law was framed on 02.08.2000. “(i) Whether the ITAT was right in holding that the insurance premium collected by the assessee is not a trading receipt?” 2. The assessee was engaged in the business of financing of vehicles. He collected insurance premium from the hire of vehicles and got them insured by premium and such surplus was credited to the separate account for the Assessment 1990-91. The amount of ₹1,53,281/- was sought to be brought to tax by way of an addition, in the assessment year. The Assessing 2015:DHC:208-DB

ITA 62/2000 Page 2

Officer invoked Section 41(1) and relied upon the judgment of Supreme Court in CIT vs. Sugali Sugar Works Pvt. Ltd. 236 ITR 518. The assessee contends that the Revenue ought not to have mechanically added the amount merely by relying on Section 41(1) and is necessarily obliged to investigate as to whether the obligation has ceased in reality. 3. At the outset, it is noticed that since the total addition itself was ₹1,53,281/-, the tax fact is, therefore, just about ₹35,000/-. In view of the prevailing instruction of CBDT dated 9.02.2011(No. 3/2011) which states that the revenue’s appeals are maintainable only if the tax effect exceeds ₹10 lakhs, the present appeal is not maintainable. The said circular has been held to be applicable even in pending appeals. 4. For these reasons, the appeal is not maintainable and is consequently dismissed.

S. RAVINDRA BHAT (JUDGE)

R.K.GAUBA (JUDGE) JANUARY 12, 2015 mr 2015:DHC:208-DB

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