2015 (1) TMI 1304 - HC - Income Tax

Addition on account of closing stock of stores, spare-partes and tools etc. - Held that - The first substantial question of law has been answered in favour of the Revenue and against the assessee vide separate order of today rendered in Commissioner of Income Tax (Central), Ludhiana Vs. M/s Highway Cycle Industries Ltd. 2015 (2) TMI 119 - PUNJAB & HARYANA HIGH COURT Allowable business expenditure - Amount spent on Gift-items like shawls, watches, tea-sets and other misc. items distributed amongst the dealers - Held that - The second substantial question of law, the same is covered by the judgment of this Court in Commissioner of Income Tax Vs. Avon Cycles Ltd. 2006 (12) TMI 125 - PUNJAB AND HARYANA HIGH COURT

Summary

Issues involved:
1. Appeal under Section 260 A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 1989-90.
2. Deletion of addition of Rs. 34,79,900 made on account of closing stock of stores, spare-parts, and tools.
3. Treatment of Rs. 4,75,816 spent on Gift-items as business expenditure.

Analysis:
1. The High Court heard an appeal by the Revenue under Section 260 A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal for the assessment year 1989-90. The Revenue raised two substantial questions of law for consideration.

2. The first issue concerned the addition of Rs. 34,79,900 on account of closing stock of stores, spare-parts, and tools. The High Court answered this question in favor of the Revenue based on a separate order rendered in a related case. The judgment in a different case supported the Revenue's position on this matter.

3. Moving on to the second substantial question of law, the High Court referred to a previous judgment in Commissioner of Income Tax Vs. Avon Cycles Ltd. (2008) 303 ITR 345. Based on this precedent, the High Court ruled in favor of the respondent, considering the amount of Rs. 4,75,816 spent on Gift-items like shawls, watches, tea-sets, and other miscellaneous items as a legitimate business expenditure.

4. In conclusion, the High Court partially allowed the appeal. The first substantial question of law was decided in favor of the Revenue, while the second substantial question was resolved in favor of the respondent. The judgment provided a detailed analysis of each issue raised by the parties, citing relevant legal precedents and reasons for the decisions made.