COMMISSIONER OF INCOME TAX, LD V. SHIPLEY HOSIERY & TEXTILES CHO

ITR/152/1999

AI Insights

The case revolves around the Income Tax Appellate Tribunal's decision to delete an addition of Rs.4,52,204 made on account of a refund of custom duty, which the Tribunal deemed inchoate and not fully under the dominion of the assessee, M/s Shiply Hosiery & Textiles. The Assessing Officer had included this amount in the taxable income for the assessment year 1989-90, arguing that the assessee had claimed it as an expense in the year the custom duty was paid. The CIT(A) and subsequently the Tribunal sided with the assessee, referencing earlier cases. However, the High Court of Punjab and Haryana, upon reviewing the matter, reversed the Tribunal's decision, aligning with a precedent set in a similar case, Surinder Mohan Jalota, which was decided in favor of the revenue.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 682974 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 14-09-2010
• Assessment Year: misc
• Other Referred Cases: Shri Surinder Mohan Jalota, Trustee, M/s Jalota Family Trust v. ACIT, Ludhiana, ITO v. Vijay Enterprises
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: RAJESH KATOCH
• Keywords: Suspense account; Taxable income; Custom duty refund; Inchoate right; Dominion over amount
• Section: 41(1); 256(1)

Judgement Text

"ITR No. 152 of 1999 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No. 152 of 1999 Date of Decision: 14.9.2010 The Commissioner of Income-tax, Ludhiana ....Petitioner. Versus M/s Shiply Hosiery & Textiles ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Advocate for the revenue. None for the assessee. AJAY KUMAR MITTAL, J. 1. The Income Tax Appellate Tribunal, Chandigarh Bench (hereinafter referred to as “the Tribunal”) has referred the following question of law arising out of its order dated 21.9.1998 passed in ITA No. 1829/1991, for opinion of this Court under Section 256 (1) of the Income Tax Act, 1961 (for short “the Act”) for the assessment year 1989-90:- “Whether on the facts and in the circumstances, the Appellate Tribunal was right in law in deleting the addition of Rs.4,52,204/- made on account of receipt of refund of custom duty, on the ground that the right, title and interest of the assessee on the disputed amount was inchoate as the assessee did not have complete dominion over the said amount and the provisions of ITR No. 152 of 1999 -2- section 41(1) could not be invoked?” 2. The facts as noticed in the statement of case are that the assessee filed its return on 31.8.1989 declaring an income of Rs.51,287/-. The Assessing Officer noted that an amount of Rs.4,52,204/- had been shown by the assessee under the head 'suspense account' on liability side of the balance sheet. On enquiry, the assessee stated that the suspense account was on account of refund of custom duty granted by the Bombay High Court on the condition that the same was to be refunded to the Government within 60 days from the order of the Hon'ble Supreme Court in case the appeal filed by the Department was decided against it. The Assessing Officer observed that the assessee had already claimed the amount as expense in the year when the custom duty was paid and, therefore, held that the said amount was chargeable to tax in the year in question. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who vide order dated 13.8.1991 deleted the said addition. On appeal by the revenue, the Tribunal while relying upon the order of the Tribunal in the case of Shri Surinder Mohan Jalota, Trustee, M/s Jalota Family Trust v. ACIT, Ludhiana, ITA No. 1270 of 1990 for the assessment year 1987-88 and order dated 14.7.1998 passed in ITA No. 374/91 (ITO v. Vijay Enterprises), for the assessment year 1987-88 has adjudicated the issue in favour of the assessee by upholding the order of the CIT (A). The Tribunal further held that the provisions of Section 41(1) of the Act cannot be invoked because right, title and interest on the disputed amount was inchoate and the assessee did not have complete dominion over the said amount. ITR No. 152 of 1999 -3- 3. We have heard the learned counsel for the revenue. 4. Learned counsel for the revenue submitted that the Tribunal had decided the appeal by relying upon its earlier decision in Surinder Mohan Jalota's case against which reference had been made to this Court, i.e. ITR No. 106 of 1996 (The Commissioner of Income-tax, Patiala v. Surinder Mohan Jalota) which stands decided on 5.7.2010 in favour of the revenue. He claims that following the aforesaid judgment, the reference deserves to be answered in favour of the revenue. 5. The matter in Surinder Mohan Jalota's case on the basis of which the issue had been decided in favour of the assessee by the Tribunal has since been reversed by this Court in ITR No. 106 of 1996 decided on 5.7.2010 and the question of law has been answered in favour of the revenue. 6. Accordingly, the question referred is answered in favour of the revenue and against the assessee. (AJAY KUMAR MITTAL) JUDGE September 14, 2010 (ADARSH KUMAR GOEL) gbs JUDGE "