Case Law Details
Case Name : Premier Breweries Ltd. Vs CIT (Supreme Court of India)
Appeal Number : Civil Appeal No. 1569 of 2007
Date of Judgement/Order : 10/03/2015
Related Assessment Year :
Issue before court:
- Whether assessee is entitled to the benefit of disallowance of commission purportedly paid by assessee to its commission agents for procurement of order for supply of liquor.
- Whether High Court can exercise jurisdiction in absence of any question of perversity of the finding of the tribunal.
- Whether High Court have power to reframe the question after the conclusion of tribunal without giving an opportunity to assessee.
- Assessee is engaged in manufacture and sale of beer and other alcoholic beverages. In some states marketing corporations were established which act as wholesalers of alcoholic beverages.
- Assessee engaged agents to coordinate with the retailers and state corporations and claimed deduction u/s 37 of the IT Act.
- AO denied the deduction and CIT (A) confirmed assessment order and held that assessee had not discharged the burden that it is entitled to deduction u/s 37 of the Act.
- Tribunal reversed the findings of CIT (A) and held claim of commission paid to agents as for purpose of business and therefore, entitled for deduction u/s 37 of the Act.
- On reference u/s 256 (2) of the Act Hon’ble High Court have framed initially twelve question referred by tribunal but finally reframed three question
- Whether, on the facts and in the circumstances of the case did the assessee discharge the burden of proof that lay on it in support of the claim for Rs. 7,75,602/-
- Whether, on the facts and in the circumstances of the case, did the assessee discharge the burden of proof that lay on it in support of the claim for Rs. 22,72,192/-?
- Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that the payment to Golden Enterprises was only for business purpose or and was in business interest?”
Contention of the revenue:
- One of the agents of the assessee i.e. M/s Golden Enterprises has engaged some other agency for the work assigned by assessee and that agent did not have infrastructure to do such service.
- Summons were issue to the Managing Director of Tamil Nadu State Marketing Corporation Ltd. (TASMAC Ltd.) who stated that M/s. Golden Enterprises had not done any liaisoning work with TASMAC Ltd.
Contention of the assessee:
- Manufacturers of beverages containing alcohol have to engage services of agents who would coordinate with the retailers and State Corporations to ensure continuous flow/supply of goods to the ultimate consumers.
- For this purposes agreements were executed between assessee and agents.
- Assessee paid commission to the agents and this expenditures was laid down wholly and exclusively for the purpose of business.
Held by the court:
- Questions of law arising in an appeal under Section 260-A of the Act must be framed at the time of admission and should not be formulated after conclusion of the arguments. Though the decision in Janardhana Rao (supra) is in the context of Section 260-A of the Act, it is urged that the same principles would apply to the exercise of jurisdiction under Section 256 of the Act particularly as the jurisdiction under Section 256 is more constricted than under Section 260-A of the Act.
- In P. Sarathy Mudaliar vs. Commissioner of Income Tax, Andhra Pradesh wherein this Court has taken the view that setting aside the order of the Tribunal in exercise of the Reference Jurisdiction of the High Court is inappropriate. This Court had observed that while hearing a Reference under the Income Tax Act, the High Court exercises advisory jurisdiction and does not sit in appeal over the judgment of the Tribunal. It has been further held that the High Court has no power to set aside the order of the Tribunal even if it is of the view that the conclusion recorded by the Tribunal is not correct.
- Regarding question of exercise of jurisdiction in absence of any question of perversity, reliance was placed on Sudarsan Silk Sarees Vs. CIT where court have held that
“In reference jurisdiction, the High Court can answer the question of law referred to it and it is only when a finding of fact recorded by the Tribunal is challenged on the ground of perversity, in the sense set out above, that a question of law can be said to arise. Since the frame of the question was not as to whether the findings recorded by the Tribunal on facts were perverse, the High Court was precluded from entering into any discussion regarding the perversity of the finding of fact recorded by the Tribunal.”
- The legal inference that should be drawn from the primary facts, as consistently held by this Court, is eminently a question of law. No question of perversity was required to be framed or gone into to answer the issues arising. In fact, as already held by this court, the questions relatable to perversity were consciously discarded by the High Court. We, therefore, cannot find any fault with the questions reframed by the High Court or the answers provided.
Hon’ble Supreme Court in this appeal have decided issue related to power and jurisdiction of High Court on a reference u/s 256 (2) of the Act. On relying upon various judgments Hon’ble Court have held that High Court was right in reframing the questions and do not agree to find fault with the answers given by high court.
Compiled by our Team Member Advocate Jagjeet Singh
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