COMMR. OF INCOME TAX V. BEE VEE LIQUORS

OP/9951/1996

AI Insights

This case involves a petition by the Commissioner of Income Tax, Cochin, against M/s. Bee Vee Liquors concerning a dispute over the assessment year 1981-82. The core issue revolves around the application of the mercantile system of accounting and the entitlement of the assessee to claim certain deductions. The Income Tax Appellate Tribunal had previously set aside the orders of the Commissioner of Income-tax (Appeals), Cochin, which led the Revenue to seek a reference of the questions of law to the High Court under section 256(1) of the Income Tax Act. The Tribunal's rejection of this application prompted the filing of the current petition under section 256(2). The High Court found merit in the Revenue's arguments and directed the Tribunal to refer the questions of law for judicial consideration.

• Counselvise Citation: [2007] 140 COUNSELVISE.COM (IT) 728468 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 26-07-2007
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: P K MENON; GEORGE GEORGE
• Keywords: Commissioner of Income Tax; Deduction computation; Income and expenditure account; Income tax appellate tribunal; Mercantile system of accounting; Kist amount; Accrued basis
• Section: 256(1); 256(2)

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.T.SANKARAN THURSDAY, THE 26TH JULY 2007 / 4TH SRAVANA 1929 OP.No. 9951 of 1996(S) ---------------------- AGAINST THE ORDER IN RA.226(COCH)/1994 IN ITA 211//COCH/92 of I.NCOME TAX APPELLATE .TRIBUNAL,COCHIN BENCH .................... PETITIONER: ------------ THE COMMISSIONER OF INCOME TAX, COCHIN. BY STANDING COUSNEL, GOVERNMENT OF INDIA (TAXES) SRI.P.K.RAVINDRANATHA MENON(SR.) SRI.GEORGE K. GEORGE. RESPONDENT: ------------- M/S. BEE VEE LIQUORS, NAYARAMBALAM, ERNAKULAM. THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 26/07/2007, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L. DATTU, C.J. & K.T. SANKARAN, J. ---------------------------------------------------------- O.P.No.9951 of 1996 ----------------------------------------------------------- Dated, this the 26th day of July, 2007 JUDGMENT H.L. DATTU, CJ. This is a petition filed by the Revenue under section 256(2) of the Income Tax Act, 1961, hereinafter for the sake of brevity referred to as the Act. 2. The assessee was before the Income Tax Appellate Tribunal, Cochin Bench in I.T.A. No.211/1992 for the assessment year 1981-82. The Tribunal has allowed the assessee's appeal and thereby has set aside the orders passed by the Commissioner of Income-tax (Appeals), Cochin, dated 31.12.1991. 3. The Revenue had filed an application under section 256(1) of the Income Tax Act inter alia requesting the Tribunal to state the case and refer the questions of law for consideration and decision of this court. The Tribunal has rejected the said application/petition. That is how the Revenue is before us in this petition filed under section 256(2) of the Act. 4. The Revenue has raised the following questions of law. They are as under: “1. Whether, on the facts and in the circumstances of the case and also in the light of the assessee's letter dated 29.9.1990 and the income and expenditure account, was the assessee following mercantile system of accounting? 2. Whether, on the facts and in the circusmtances of the case and also in the light of the papers and documents referred to in question No.1, is not the understanding of the OP 9951/1996. 2 direction in the order of the Tribunal by the Revenue and the consequential implementation correct and valid? 3. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim the kist amount on accrued basis? 4. Whether, on the facts and in the circumstances of the case and in view of the observation of the Tribunal in paragraph 6 of is order: “In law, if the mercantile system of accounting has been followed by the assessee” and hence the Tribunal not finding the system of accounting by the assessee as regards the expenditure as mercantile, the Tribunal is right in law and fact in holding that the kist amount of Rs.8,63,406/- has accrued due and the same whether paid or not should be considered as eligible for deduction? 5. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction of the sum of Rs.8,63,406/- in the computation of income? 6. Whether, on the facts and in the circumstances of the case, the interpretation put on the earlier order of the Tribunal is sustainable in law and fact? 5. After going through the orders passed by the Tribunal and after perusing the questions of law framed by the Revenue, we are of the opinion that the questions of law raised by the Revenue requires consideration and decision OP 9951/1996. 3 by this court. Therefore we pass the following: Order i) The petition is allowed. ii) A direction is issued to the Income Tax Appellate Tribunal, Cochin Bench to state the case and refer the questions of law arising out of the order passed in ITA No.211/1992 for the assessment year 1981-82 as expeditiously as possible. Ordered accordingly. H.L. DATTU, CHIEF JUSTICE. K.T. SANKARAN, JUDGE. mt/ OP 9951/1996. 4 H.L.DATTU, C.J. & K.T.SANKARAN, J. OP 9951 OF 1996 JUDGMENT 26.7.2007 "