Case Law Details
SUPREME COURT OF INDIA
HON’BLE D.P. WADHWA & HON’BLE S.S. MOHAMMED QUADRI, JJ.
Rajasthan State Warehousing Corporation Vs. CIT
Civil Appeal No. 4049 of 1994
Shri C.S. Vaidyanathan, Shri Ashok Desai, Shri V. Gauri Shankar, Dr. D.P. Pal, Shri Joseph Vellapally, Shri K.N. Shukla, Shri Pallav Shishodia, Shri A.P. Medh, Ms. Priya Hingorani, Shri B.K. Prasad, Shri S.N. Terdol, Shri S. Rajappa, Ms. Hemantika Wahi, Shri N.L. Garg, Shri C.V. Subba Rao, Shri Ranbir Chandra, Ms. Sumita Hazarika, Shri S.K. Dwivedi, Shri Tarun Gulati, Shri Hemant Sharma, Shri Arvind Kr. Sharma and Mrs. Sushma Suri, Advocates for the Appearing Parties.
Dated 23.2.2000.
Head Note : INCOME TAX ACT, 1961, Allowabilty of deduction — Section 37 .
STATUTES REFERRED: 1. Income Tax Act,1961, S.37(1)
Cases referred :
1. Commissioner of Income-tax, Madras v. Indian Bank Ltd., 56 ITR 77.
2. Commissioner of Income-tax, Bombay City 1 v. Maharashtra Sugar Mills Ltd., 82 ITR 452.
3. Punjab State Co-operative Supply and Marketing Federation Ltd. v. Commissioner of Income-tax, Patiala -I, 128 ITR 189.
4. Waterfall Estates Ltd. v. Commissioner of Income-tax, Madras (No. 1), 131 ITR 207.
5. Waterfall Estates Ltd. v. Commissioner of Income-tax, 219 ITR 563.
COMPARATIVE CITATIONS:
2000 AIR(SC) 972,2000 AIR(SCW) 629 : 2000 (242) ITR 450 : 2000 (2) JT 373 : 2000 (2) Scale 44 : 2000 (3) SCC 126 : 2000 (1) Supreme 601, 2000 (159) CTR 132, 2000 (109) TAXMANN 145
JUDGMENT
S.S. Mohammed Quadri, J.–This appeal arises from the judgment and order of the Division Bench of the High Court of Judicature for Rajasthan Bench at Jaipur in Income-tax Reference No. 86 of 1987, dated 9.11.1993. The assessee is the appellant.
2. By the order under challenge the High Court answered the following question, referred to it u/s. 256(1) of the I.T. Act, 1961 (`the Act’), in the affirmative, that is, in favour of the revenue and against the assessee:
“Whether, on the facts and in the circumstances of the case and the business of the assessee being one and indivisible, the Tribunal was right in law in holding that the expenses have to be allocated in the same percentage as the different sources of income and are not to be allowed in entirety as allowed by the Commissioner (Appeals) after following decisions noted in para 11 of the order dated 31.1.1985 for the A.Y.s 1974-75, 1975-76 and 1980-81?”
3. In the assessment year 1977-78 the appellant, a State Government Corporation, derived its income fro m interest, letting out the warehouse and administrative charges for procurement of foodgrains while working for the Food Corporation of India as well as the State Government. It claimed deduction of expenditure of Rs. 38,13,555.17 under Section 37 of the Act in computing its income under the head profits and gains of business of business or profession. The Income Tax Officer allowed only so much of the expenditure as could be allocated to the taxable income and disallowed the rest of it which was referable to the non-taxable income, being exempt under Section 10(29) of the Act. On appeal, the Commissioner of Income Tax (Appeals)-II accepted the claim of the appellant that the entire expenditure was deductible. The Revenues appeal therefrom to the Income-tax Appellate Tribunal was allowed upholding the order of the Income Tax Officer on July 17, 1986. At the instance of the appellant the question noted above was referred to the High Court. By order under challenge the High Court confirmed the order of the Income-tax Appellate Tribunal. Hence this appeal.
4. Mr. Joseph Vellapally, learned senior counsel appearing for the appellant, relied on the judgments of this Court in Commissioner of Income-tax, Madras v. Indian Bank Ltd., 56 ITR 77, Commissioner of Income-tax, Bombay City 1 v. Maharashtra Sugar Mills Ltd., 82 ITR 452 and of Punjab and Haryana High Court in Punjab State Co-operative Supply and Marketing Federation Ltd. v. Commissioner of Income-tax, Patiala -I, 128 ITR 189 in support of his contention that the order of the High Court is unsustainable.
5. The contention of Mr. K.N. Shukla, learned senior counsel appearing for the Revenue, is that the expenditure which is attributable to the exempted income is not a permissible deduction and it has been rightly disallowed by the High Court.
6. To appreciate the contentions of the learned counsel it may be useful to refer to Section 37(1) of the Act :
“37. General. – (1) Any expenditure (nor being expenditure of the nature described in Sections 30 to 36 * * * and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession.”
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