Allahabad H.C : The disallowance of the head ‘guest house expenses’ could not be made ignoring the law laid down by the hon’ble Supreme Court in the case of Britannia Industries Ltd. v. CIT [2005] 278 ITR 546 (SC)

High Court Of Allahabad

CIT vs. Baghpat Co-Operative Sugar Mills Ltd.

Assessment Year : 1997-98

Section : 37(4)

Ashok Bhushan And Mahesh Chandra Tripathi, JJ.

IT Appeal Defective No. 41 Of 2006

March  24, 2014

JUDGMENT

1. This income-tax appeal relates to the assessment year 1997-98.

2. Heard Shri R. K. Upadhyaya, learned counsel for the appellants and Shri R. S. Agrawal for the assessee.

3. Shri R. K. Upadhyaya, learned counsel for the appellants, submits that the certified copy of the assessment order dated August 12, 2005, has been filed today, hence the defect pointed out earlier stands removed. He further submits that the certified copy of the order dated August 12, 2005, has already been filed in Income Tax Appeal No. 74 of 2006, which records have been sent along with this appeal. In view of the filing of the certified copy of the order dated August 12, 2005, in Income Tax Appeal No. 74 of 2006, the said defect also stands removed. This appeal has been admitted on following question of law :

“(3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal have erred in law in holding that the disallowance of Rs. 1,15,000 under the head ‘guest house expenses’ could not be made ignoring the law laid down by the hon’ble Supreme Court in the case of Britannia Industries Ltd. v. CIT [2005] 278 ITR 546 (SC)?”

4. Shri R. K. Upadhyaya, learned counsel for the appellants, submits that the issue raised in this appeal is fully covered by the judgment of the apex court in Britannia Industries Ltd. v. CIT [2005] 278 ITR 546/148 Taxman 468.

5. In the present case, the Assessing Officer has disallowed the expenses of Rs. 1,15,000 under the head “Guest house expenses”. The appellate authority has deleted the said expenses of Rs. 1,15,000 under the head “Guest house expenses” against which the Department went in appeal before the Tribunal. The Tribunal following its earlier decision of I. T. A. T. Nos. 4339 to 4341/Del/99, has dismissed the appeal of the Department holding it to be covered in favour of the assessee.

6. Shri R. K. Upadhyaya, learned counsel for the appellants, submits that in view of the judgment of the apex court in Britannia Industries Ltd. (supra) the view of the Tribunal is no longer correct.

7. Shri R. K. Upadhyaya, learned counsel for the appellant, has referred to paragraphs 11 and 30 of the judgment in which the following has been laid down by the apex court in Britannia Industries Ltd. (supra) which are quoted below (pages 554 and 558) :

“Sub-section (4), which was inserted in the statute book with effect from 1st April, 1970, is specific and provides that notwithstanding anything contained in sub-section (1) and sub-section (3) no allowance shall be made in respect of any expenditure incurred by the assessee after February 28, 1970, on the maintenance of any residential accommodation in the nature of a guest house and no allowance shall be made in respect of depreciation of any building used as a guest-house or depreciation of any assets in the guest-house. However, a guest-house maintained as holiday home in the circumstances indicated have been excluded from the purview of sub-section (4) referred to hereinabove . . .

The only question which we are called upon to consider in the instant case is whether the expression ‘premises and buildings’ referred to in sections 30 and 32 and used for the purposes of the business or profession would include within its scope and ambit the expression ‘residential accommodation including any accommodation in the nature of guest-house’ used in sub-sections (3), (4) and (5) of section 37 of the Act. While the two expressions can be similarly interpreted, a distinction has been sought to be introduced for the purposes of section 37 by specifying the nature of building to be a guest-house. In our view, the intention of the Legislature appears to be clear and unambiguous and was intended to exclude the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purposes of a guest-house of the nature indicated in sub-section (4) of section 37. When the language of a statue is clear and unambiguous, the courts are to interpret the same in its literal sense and not to give it a meaning which would cause violence to the provisions of the statute. If the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodations used for the purposes of business or profession, then it would not have felt the need to amend the provisions of section 37 so as to make a definite distinction with regard to buildings used as guest-houses as defined in sub-section (5) of section 37 and the provisions of sections 31 and 32 would have been sufficient for the said purpose. The decisions cited by Dr. Pal contemplate situations where specific provision had been made in sections 30 to 36 of the Act and it was felt that what had been specifically provided therein could not be excluded under section 37. The clarification introduced by way of sub-section (5) of section 37 was also not considered in the said case.”

8. In view of the law laid down by the apex court in the case of Britannia Industries Ltd. (supra), we are of the view that both the appellate authority and the Tribunal committed error in deleting the order of the Assessing Officer who had disallowed the expenses of “guest house expenses” of Rs. 1,15,000.

9. In the result, the appeal is allowed.

10. Question No. 3 is answered in favour of the Revenue and against the assessee.

[Citation : 363 ITR 319]