MIHIR TEXTILES LTD. V. COMMISSIONER OF INCOME-TAX

ITR/41/1988

AI Insights

The case involves Mihir Textiles Ltd. against the Commissioner of Income-Tax, concerning four questions referred to the High Court of Gujarat regarding the interpretation and application of various sections of the Income-tax Act, 1961 for the assessment year 1979-80. The questions pertained to the legality of disallowances made under section 40(c) for remuneration to the Managing Director, inclusion of commission in disallowances, disallowance under section 37(5), and entitlement to a royalty deduction. The court's decisions were heavily based on a precedent set in a previous case involving the same assessee, leading to a mix of affirmations and reversals of the Tribunal's decisions.

• Counselvise Citation: [2001] 140 COUNSELVISE.COM (IT) 693347 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 04-10-2001
• Assessment Year: misc
• Other Referred Cases: Income-tax Reference No. 93 of 1987
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: B B NAIK; MANISH BHATT
• Assessee Lawyers: M J SHAH
• Keywords: Assessment Year 1979-80; Commission; Disallowance; Income Tax; Remuneration; Royalty
• Section: 40(c); 37(5)

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 41 of 1988 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 -------------------------------------------------------------- MIHIR TEXTILES LTD. Versus COMMISSIONER OF INCOME-TAX -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 41 of 1988 MR MJ SHAH for Petitioner No. 1 MR BB NAIK with MR MANISH R BHATT for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE D.A.MEHTA Date of decision: 04/10/2001 ORAL JUDGEMENT (Per : MR.JUSTICE M.S.SHAH) In this reference, four questions are referred for our opinion in respect of assessment year 1979-80. While the first three questions are referred at the instance of the assessee, the last question is referred at the instance of the revenue. 2. We have heard Mr Manish J Shah, learned counsel for the assessee and Mr BB Naik, learned counsel for the revenue. 3. Both the learned counsel state that the controversies raised in the questions referred herein are concluded by the decision dated 28.8.2001 of this Court in Income-tax Reference No. 93 of 1987 in case of this very assessee. Following the said decision, we answer the questions as under :- Question No. 1 Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the disallowance is required to be made u/s. 40(c) out of the remuneration paid to the Managing Director notwithstanding the fact that the remuneration was reasonable having regard to the business requirements of the Company?\" Following the aforesaid decision in Income-tax Reference No. 93 of 1987, our answer is in the affirmative i.e. in favour of the revenue and against the assessee. Question No. 2 \"Whether, the Appellate Tribunal was right in law in holding that commission is required to be included while computing the disallowance u/s.40(c) ?\" Following the aforesaid decision in Income-tax Reference No. 93 of 1987, our answer is in the affirmative i.e. in favour of the revenue and against the assessee. Question No. 3 \"Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in confirming the disallowance of Rs.40,903/= invoking the provisions of section 37(5) of the Income-tax Act, 1961 ?\" Following the aforesaid decision in Income-tax Reference No. 93 of 1987, our answer is in the negative i.e. in favour of the assessee and against the revenue. Question No. 4 \"Whether, in law and on facts the assessee is entitled to the deduction of the royalty of Rs.36,969/- pad to Mettur Beardshell Limited ?\" Following the aforesaid decision in Income-tax Reference No. 93 of 1987, our answer is in the affirmative i.e. in favour of the assessee and against the revenue. 4. The reference accordingly stands disposed of with no order as to costs. (M.S. Shah, J.) (D.A. Mehta, J.) sundar/- "