9911796707
TMI Blog2003 (7) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in deleting the disallowance made under section 37(4), the guest house expenditure without giving any specific finding?" As will appear from the statement of the case, the Assessing Officer had disallowed a sum of Rs. 9,96,677 on account of guest-house maintenance under section 37(4) of the Income-tax Act, 1961. Aggrieved thereby, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) on the ground that only a sum of Rs. 4,55,630, which had already been included in the return, had been disallowed under section 37(4) of the above Act and the amount of Rs. 4,86,631 had not been disallowed under section 37(4), inasmuch as, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this reference had also fallen for the consideration of this court in CIT v. Upper Ganges Sugar Mills Ltd. [1994] 206 ITR 215 and this court had held that the language of sub-section (4) of section 37 was quite emphatic and provided that no allowance at all was intended in respect of any expenditure incurred after February 28, 1970, on the maintenance of any residential accommodation in the nature of a guesthouse. It was held further that no allowance of depreciation is also permissible for such guest-house or any assets in such guest-house. Mr. Mullick also referred to an earlier decision in the case of Kesoram Industries and Cotton Mills Ltd. v. CIT [1991] 191 ITR 518, wherein this court had similarly observed that section 37(4) had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se [2002] 257 ITR 681, the question of law involved in this reference has already been answered and does not require any further scrutiny. Appearing for the respondent-assessee, Dr. Debi Pal, urged that the provisions of section 37 were general in nature and intended to cover situations not contemplated or covered by sections 30 to 36 of the Income-tax Act, 1961. Dr. Pal urged that by the use of the non obstante clause in sub-section (4) of section 37, the Legislature intended that sub-section (4) was to have an overriding effect over sub-sections (1) and (3) and was to relate to section 30 to 36 which had been excluded by sub-section (1). Dr. Pal urged that certain deductions bad been allowed under sections 30, 31 and 32 of the Act which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the expenditure related to the maintenance of the guest-house covered by sections 30 and 31 of the Act, the provisions of sub-sections (1) and (3) of section 37 would not be attracted to disallow the permitted deductions. Dr. Pal then referred to another decision of the Bombay High Court in the case of Century Spinning and Manufacturing Co. Ltd. v. CIT [1991] 189 ITR 660, where following its decision in the case of Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124 it was more explicitly observed that although sub-section (4) of section 37 is a non obstante clause, it is a non obstante clause vis-a-vis sub-section (1) and sub-section (3) of section 37 only, and if an expenditure or allowance is allowable under other sections of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at subsection (4) of section 37 of the Income-tax Act clearly provides that no allowance at all is intended in respect of any expenditure incurred on the maintenance of guest-houses after February 28, 1970, the Bombay High Court had held in Chase Bright Steel Ltd. (No. 1)'s case [1989] 177 ITR 124 that the expenditure related to the maintenance of guest houses covered by sections 30 and 31 could not be disallowed on account of sub-sections (1) and (3) of section 37. Of the two views expressed, the language of sub-section (4) of section 37 of the above Act appears to support the view expressed by this court. Clause (i) of sub-section (4) states in no uncertain terms that no allowance shall be made in respect of any expenditure incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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