Commissioner Of Income-Tax vs Jagjit Industries Ltd.
1987 Latest Caselaw 135 Del

JUDGMENT

S. Ranganathan, J.

1. These are three applications by the Commissioner of Income-tax under section 256(2) which relate to the assessment years 1973-74, 1974-75 and 1975-76. The question raised which is common to all the three years is :

"Whether the Income-tax Appellate Tribunal was correct in law and on facts in allowing the relief under section 80J in respect of the Viva division of the assessed-company ?"

2. We have heard counsel at some length and we are of the opinion that a question of law does arise out of this aspect of the Tribunal's order. The Income-tax Officer and the commissioner of Income-tax (Appeals) had denied the assessed relied under section 80J on the ground that the Viva unit was not entitled to the relief as it was formed by the transfer of machinery previously used by the assessed. The Tribunal, however, appears to have allowed the relief on the footing that the Viva unit constituted a mere expansion of the unit previously in existence. On the other hand, the contention of the Revenue is that this unit was formed by the splitting up or reconstruction of the unit already in existence. The facts on the basis of which one can arrive at either conclusion are not fully discussed in the present orders and we are of the opinion that this aspect of the matter does give rise to a question of law. We, therefore, direct the Tribunal to state and refer the following question of law for the decision of this court :

"Whether the Income-tax Appellate Tribunal was correct in law and on the facts in allowing the relief under section 80J in respect of the Viva division of the assessed-company for the assessment years 1973-74, 1974-75 and 1975-76 ?"

3. However, two items of clarification are necessary in respect of the question directed to be referred. It is pointed out by counsel for the respondent that for the assessment years 1971-72 and 1972-73, the Tribunal had already granted relief under section 80J and that order had become final. Counsel for the petitioner, despite enquiries, has not been able to find out whether any petition under section 256(2) has been filed in respect of the earlier years. Counsel for the respondent argues that since relief under section 80J has already been given for the first two years, he is automatically entitled to relief under this section for the subsequent years in view of the language of section 80J(2). We wish to make it clear that this aspect is also involved and included in the question which we have directed to be referred above and the Tribunal may state the facts relevant thereto also. Counsel for the petitioner submitted that in coming to its conclusion regarding availability of section 80J relief, the Tribunal has also granted the relief to the assessed for one of the three assessment years in respect of borrowed capital which is contrary to the decision of the Supreme Court in the case of Lohia Machines [1985] 152 ITR 308. This question does not appear to have been raised in terms either before the Tribunal or in the applications before the Tribunal and this court. However, this aspect of the matter is academic because counsel for the respondent states that when the Income-tax Officer implemented the decision of the Tribunal, he had applied the principles of Lohia Machines [1985] 152 ITR 308 (SC) and the assessed has not disputed this. In the circumstances, this aspect of the matter is not covered by the question which we have directed to be referred.

4. For the assessment year 1975-76, another question has also been raised on behalf of the petitioner which reads as under :

"Whether the Income-tax Appellate Tribunal was correct in law and on facts in not treating the expenses of Rs. 33,302, incurred in providing tea, coffee, etc., to business constituents as entertainment expenses and thereby deleting the addition of Rs. 33,302, particularly in the light of the amendment introduced by way of Explanation 2 to section 37(2A) ?"

5. We are of opinion that this is a question which requires to be referred. We direct the Tribunal to state and refer this question of law for the decision of this court, so far as the assessment year 1975-76 is concerned. The Tribunal may make a consolidated statement of case for all the three assessment years. The applications are disposed of. No costs.