Legal Case Summary

Case Details
Case ID 3a4e5498-78f6-4438-812c-21f4dc099e29
Body View case body.
Case Number Income-tax Reference Case No.152 of 1993
Decision Date Dec 21, 1995
Hearing Date
Decision The Tribunal was justified in holding that the provisions of section 41(1) could be invoked to tax the refunds received during the accounting year relevant to the assessment year 1983-84, even when the part of excise duty was not claimed as expenditure in the profit and loss accounts of earlier years and the applicant had kept a separate account in respect of collection and payment of excise duty. This decision underscores the principle that the totality of facts must be considered, and that the tax component forms an integral part of the value of goods, regardless of the accounting procedures maintained by the assessee.
Summary The Karnataka High Court addressed an income tax reference concerning the treatment of a refund of central excise duty under section 41(1) of the Income Tax Act, 1961. The case involved Mysore Thermo Electric (P.) Ltd., which contested the tax implications of a refund received during the assessment year 1983-84. The court examined whether the refund could be subjected to tax despite the amounts not being previously claimed as deductions. The court reaffirmed that the assessment of tax should reflect the actual economic transactions and that separate accounting practices do not negate tax obligations. This decision is relevant for tax practitioners and businesses dealing with excise duties and refunds, emphasizing the importance of understanding tax liabilities and the implications of refunds on taxable income.
Court Karnataka High Court
Entities Involved
Judges M.F. Saldanha, Chandrashekaraiah
Lawyers G. Sarangan, S. Parthasarathi, M.V. Seshachala
Petitioners Mysore Thermo Electric (P.) Ltd
Respondents Commissioner of Income Tax
Citations 1998 SLD 105, 1998 PTD 841, (1996) 221 ITR 504
Other Citations CIT v. Express Newspapers Ltd. (1964) 53 ITR 250 (SC), McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148, Kesoram Industries and Cotton Mills Ltd. v. CWT (1966) 59 ITR 767 (SC), Motilal Ambaidas v. CIT (1977) 108 ITR 136 (Guj.), Abdul Quader (R.) & Co. v. STO (1964) 15 STC 403 (SC), B.V. Aswathiah & Bros. v. CIT (1992) 198 ITR 108 (Kar.), Cape Brandy Syndicate v. IRC (1920) 12 TC 358 (KB), Chatturam v. CIT (1947) 15 ITR 302 (FC), CIT v. Bharat Iron and Steel Industries (1993) 199 ITR 67 (Guj.), CIT v. Breach Candy Swimming Bath Trust (1955) 27 ITR 279 (Bom.), CIT v. Jug Sah Muni Lal Sah (1939) 7 ITR 522 (Pat.), CIT v. Kabbur Brothers (1981) 128 ITR 43 (Kar.), CIT v. Kumardhubi Engineering Works Ltd. (1978) 115 ITR 58 (Cal.), CIT v. Mahaliram Ramjidas (1940) 8 ITR 442 (PC), CIT v. Nathuabhai Desabhai (1981) 130 ITR 238 (MP), CIT v. Poonam Chand Trilok Chand (1976) 105 ITR 618 (All.), CIT (Addl.) v. TI. Nagireddy & Co. (1976) 105 ITR 669 (AP), CIT v. Thirumalaiswamy Naidu & Sons (1984) 147 ITR 657 (Mad.), Fernandez (A.V.) v. State of Kerala (1957) 8 STC 561 (SC), George Oakes (Pvt.) Ltd. v. State of Madras (1961) 12 STC 476 (SC), Gursahai Saigal v. CIT (1963) 48 ITR (SC) 1, Ikrahnandi Coal Co. v. CIT (1968) 69 ITR 488, India United Mills Ltd. v. CEPT (1955) 27 ITR 20 (SC), Indian Motor Transport Co. v. CIT (1978) 114 ITR 677 (All.), Jagatnarain Durga Prasad v. CIT (1970) 76 ITR 214 (All.), Kedarnath Jute Mfg. Co. Ltd. v. CIT (1971) 82 ITR 363, Laxmipat Singhanta v. CIT (1969) 72 ITR 291 (SC), Love v. Norman Wright (Builders) Ltd. (1944) 1 All ER 618 (CA), Maharajah of Pithapuram v. CIT (1945) 13 ITR 221 (PC), Murarilal Mahabir Prasad v. Vad (B.R.) (1976) 37 STC 77 (SC), Nalinikant Ambalal Mody v. Narayan Row (S.A.L.), CIT (1966) 61 ITR 428 (SC), Paprika Ltd. v. Board of Trade (1944) 1 All ER 372 (KB), Punjab Distilling Industries Ltd. v. CIT (1959) 35 ITR 519 (SC), Sharma & Co. v. ITO (1972) 86 ITR 741 (All), Sinclair Murray & Co. (P.) Ltd. v. CIT (1974) 97 ITR 615 (SC), Subramanyam (K.G.) v. CIT (1992) 195 ITR 199 (Kar.), T.M.M. Madalai Nadar & Co. v. CIT (1956) 30 ITR 191 (Mad.), Tirunelveli Motor Bus Service Co. (P.) Ltd. v. CIT (1970) 78 ITR 55 (SC), Union Bank of Bijapur and Sholapur Ltd.: In re (1942) 10 ITR 21 (Bom.), Chowringhee Sales Bureau (P.) Ltd. v. CIT (1973) 87 ITR 542
Laws Involved Income Tax Act, 1961
Sections 256(2)