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Gujarat High Court

Dy. C.I.T vs Deepak Nitrite Ltd.....Opponent(S) on 3 November, 2014

Author: Ks Jhaveri

Bench: Ks Jhaveri, K.J.Thaker

         O/TAXAP/467/2000                                   JUDGMENT




           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                            TAX APPEAL NO. 467 of 2000



FOR APPROVAL AND SIGNATURE:



HONOURABLE MR.JUSTICE KS JHAVERI


and
HONOURABLE MR.JUSTICE K.J.THAKER

================================================================

1     Whether Reporters of Local Papers may be allowed to see
      the judgment ?

2     To be referred to the Reporter or not ?

3     Whether their Lordships wish to see the fair copy of the
      judgment ?

4     Whether this case involves a substantial question of law as
      to the interpretation of the Constitution of India, 1950 or any
      order made thereunder ?

5     Whether it is to be circulated to the civil judge ?

================================================================
                           DY. C.I.T.....Appellant(s)
                                    Versus
                      DEEPAK NITRITE LTD.....Opponent(s)
================================================================
Appearance:
MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1
MR JP SHAH, ADVOCATE for the Opponent(s) No. 1
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          CORAM: HONOURABLE MR.JUSTICE KS JHAVERI
                 and
                 HONOURABLE MR.JUSTICE K.J.THAKER



                                     Page 1 of 5
        O/TAXAP/467/2000                                             JUDGMENT




                                Date : 03/11/2014


                                ORAL JUDGMENT

(PER : HONOURABLE MR.JUSTICE KS JHAVERI)

1. By way of this appeal, the Revenue has challenged the impugned judgment and order dated 6.1.2000 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'C', Ahmedabad in ITA No. 3331/Ahd/1994 for the Assessment Year 1990-

91.

2. This appeal was admitted to consider the following substantial questions of law:

A) "Whether on the facts and circumstances of the case and in law the ITAT was justified in confirming the order of the CIT(Appeals) deleting the addition of Rs. 55,61,203/- made by the Assessing Officer disregarding the fact that the assessee's case was fully covered by the decision of the Hon'ble Supreme Court in the case of Mc'Dowel case reported at 154 ITR 148 ?"

B) "Whether on the facts and circumstances of the case and in law the ITAT was justified in confirming the order of the CIT (Appeals) deleting the Page 2 of 5 O/TAXAP/467/2000 JUDGMENT guest house expenses in respect of rent, purchase of Provisions, telephone, electricity and repairs andmaintenance of Rs. 10,800/-, Rs. 33,697/-, Rs. 55,774/- & Rs. 44,473/- respectively particularly when such expenses are clearly disallowable u/s. 37(4) of the Act ?"

C) "Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in law in upholding the CIT(A)'s order allowing deduction under section 32AB of the Act ?"

3. The brief facts of the present case are that the assessee company is engaged in the manufacture of various chemicals products. Its main products are concentrated and diluted nitric acid, sodium nitrite, sodium nitrate and ammonium nitrates etc. In the return of income was filed on 31.12.1990. In the return, the assessee company has claimed short-term capital loss on sale of units amounting to Rs. 1,96,92,000/-. The assessee had acquired 4,00,000 units on 6.10.88 which were sold by it on 20.4.89 aond on which the assessee has earned a profit of Rs. 4,58,000/-. However, the assessee purchased One Crore Units on 29.5.89 for Rs. 15.04 crores which were sold by it on 4.7.89 at Rs. 13.10 crores.

         O/TAXAP/467/2000                                                JUDGMENT




After       including              the       cost           of     transfer        and

commission at Rs. 7.50 lakhs, a total oss of Rs. 2,01,50,000/- was incurred by the assessee on this transaction. The assessee had set off this loss against its business income of this year. For the purpose of purchasing the units, the assessee had taken a loan of Rs. 15 crores from its sister concern M/s. Deepak Fertilizers & Petrochemicals Corporation Ltd. On this loan, an interest of Rs. 21,83,698/- was paid to the sister concern. The assessee was the owner of the Unit only for One month and seven days and the total amount of dividend received from the UTI amounted to Rs. 1,82,23,200/-. The assessee claimed deduction under sec. 80-M on the above dividend. If the whole transaction is seen in its proper perspective, it shall be seen that the assessee had resorted to this transaction for the sole purpose of reducing its profits. Therefore, notices came to be issued under sec. 143(2) and 142(1) to the assessee. The order passed by the CIT(A) has been upheld by the Income Tax Appellate Tribunal, Ahmedabad Bench 'C' against which the present Tax Appeal is preferred by the Revenue.

4. Heard the learned advocates appearing for the respective parties. The issue involved in the present Tax Appeal is covered by the decision of this Court rendered in Income Tax Reference No. 66/1998 dated 6.5.2008, and therefore, the Page 4 of 5 O/TAXAP/467/2000 JUDGMENT present appeal requires to be dismissed because the said decision will enure for the benefit of the assessee as the same is fully applicable in the facts of this case. Hence, we are not giving any elaborate reasonings and all the questions are answered against the appellant - Revenue and in favour of the respondent-Assessee. The present Tax Appeal is dismissed.

(K.S.JHAVERI, J.) (K.J.THAKER, J) mandora Page 5 of 5