Ita v. Chase Bright Steel Ltd. (

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN TUESDAY, THE 24TH DAY OF JULY 2012/2ND SRAVANA 1934 I.T.A.No.24 of 2002 ------------------------------------- [AGAINST THE ORDER IN I.T.A.No.641 (COCH)/1996 DATED 26.07.2001OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN](ASSESSMENT YEAR 1992-93) --------------------- APPELLANT/APPELLANT:- --------------------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS.SRI.P.K.R.MENON (SR.), SENIOR COUNSEL FOR GOI (TAXES) SRI.JOSE JOSEPH, SC FOR IT. RESPONDENT/RESPONDENT:- ---------------------------------------------- M/S.FORBES, EWART & FIGGIS (P) LTD., COCHIN-3. BY ADVS. SRI.A.K.JAYASANKAR NAMBIAR (SENIOR ADVOCATE) SRI.ANIL D. NAIR. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 24-07-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- Thottathil B.Radhakrishnan & K.Vinod Chandran, JJ. ------------------------------------------- I.T.A.No.24 of 2002 ------------------------------------------- Dated this, the 24[th] day of July, 2012 JUDGMENT K.Vinod Chandran,J: The Revenue is in appeal, raising the following questions of law: i) Whether, on the facts and in the circumstances of thecase the Tribunal is right in law in confirming the orderof the CIT (A) directing the assessing officer to allowguest house expenses incurred by the assessee anddepreciation on guest house as claimed by theassessee?case the Tribunal is right in law in confirming the orderof the CIT (A) directing the assessing officer to allowguest house expenses incurred by the assessee anddepreciation on guest house as claimed by theassessee? ii) Whether, on the facts and in the circumstances of thecase and also in the light of sub-section (5) of Section37, the Tribunal is justified in law in interfering with theorder of the assessing authority with reference to guesthouse issue/guest house expenditure?case and also in the light of sub-section (5) of Section37, the Tribunal is justified in law in interfering with theorder of the assessing authority with reference to guesthouse issue/guest house expenditure? 2. Essentially the issue raised in the appeal is regarding the order of the first appellate authority, as confirmed by the Tribunal,allowing the claim of the assessee that the amounts spent formaintaining residential accommodation at Madras and Coimbatore were allowable as expenditure incurred towards payment of rentunder Section 37 of the Income Tax Act, 1961 (hereinafter referredto as “the Act”). The claim of the assessee was that the apartmentsat Madras and Coimbatore were kept ready for stay by the touringofficers of the assessee due to the difficulties faced by such officersto get accommodation in those cities. The first appellate authorityallowed the claim of the assessee relying on the decision of theBombay High Court in CIT v. Chase Bright Steel Ltd. (No.1) [1989]177 ITR 124. 3. The Tribunal relied on a decision of the Calcutta High Court, reported in Commissioner of Income Tax v. Parshva Properties, 164 ITR 673, wherein a bungalow situated in a remotecorner kept ready for the employees of the company, auditors, etc.was held to be not liable to be treated as a guest house underSection 37(4) of the Act. 4. Due to the conflicting decisions of the various HighCourts, the said issue had engaged the attention of the Hon'bleSupreme Court in Britannia Industries Ltd. v. CIT, [2005] 278 ITR546 (SC). The Hon'ble Supreme Court disagreed with the BombayHigh Court judgment above cited and found favour with the ratiodecidendi of Calcutta High Court judgments; delivered after the 3. The Tribunal relied on a decision of the Calcutta High Court, reported in Commissioner of Income Tax v. Parshva Properties, 164 ITR 673, wherein a bungalow situated in a remotecorner kept ready for the employees of the company, auditors, etc.was held to be not liable to be treated as a guest house underSection 37(4) of the Act. 4. Due to the conflicting decisions of the various HighCourts, the said issue had engaged the attention of the Hon'bleSupreme Court in Britannia Industries Ltd. v. CIT, [2005] 278 ITR546 (SC). The Hon'ble Supreme Court disagreed with the BombayHigh Court judgment above cited and found favour with the ratiodecidendi of Calcutta High Court judgments; delivered after the decision of that Court cited by the Tribunal. The Supreme Court heldthat the intention of the legislature in introducing sub-sections (3), (4)and (5) of Section 37 is clear and unambiguous and was intended toexclude the expenses towards rents, repairs and also maintenanceof premises/accommodation used for the purpose of anyaccommodation in the nature of guest house indicated insub-section (4) of Section 37. 5. Respectfully following the above decision, we answerboth the questions of law framed by the Revenue in favour of theRevenue and against the assessee. In such circumstances, theorder of the assessing officer on the aforesaid issue is restored,setting aside the orders of the first appellate authority, as confirmedby the Tribunal. The Income Tax Appeal is allowed as above. Sd/- Thottathil B.Radhakrishnan Judge vku/ Sd/- K.Vinod Chandran Judge. - true copy -