Commissioner Of Income-Tax vs Bharat Commerce And Industries ...
1989 Latest Caselaw 396 Del

JUDGMENT

Kirpal, J.

1. By this petition under section 256(2), the Commissioner of Income-tax wants the Tribunal to state the case and refer the following question of law to this court :

"1. Whether on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct both on facts and law in holding that sum of Rs. 32,032 which was part of Rs. 5,95,923 treated by the Income-tax officer as capital expenditure was actually of revenue nature and was allowable as expenditure following their decision for the assessment year 1973-74 which has not been accepted by the Department ?

2, whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct in law in holding that the entire expenditure of Rs. 5,95,923 was expenditure of revenue nature following accepted by the Department ?

3. Whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct in law in holding that the contingent liability of Rs. 2,30,77 for leave salary was an allowable deduction following their decision for the assessment year 1975-76 which has not been accepted by the Department ?

4. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the expenditure to the 11,928 incurred on repairs of Shiv Temple at Nagda was incidental to the assessed's business and thereby directing that the amount should be allowed as an expenditure ?

5. whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was in law in reducing the disallowance of Rs. 20,000 confirmed by the Commissioner of Income-tax (Appeals) to Rs. 7,000 under the head "Entertainment expenses" by ignoring the principles laid down by the Punjab and Haryana High Court in CIT v. Khem Chand Bahadur Chand [1981] 131 ITR 336 [FB] ?

6. Whether, on the facts and the circumstances of the case, the Income-tax Appellate Tribunal was correct both on facts and in law in directing that weighted deduction on a sum of Rs. 6,64,146 should be allowed in this case by ignoring the material fact that this was an expenditure of capital nature ?

7. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the entire expenditure of Rs. 61,119 incurred in the shifting was not an expenditure nature ?

8. Whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct in law in holding that a sum of Rs. 2,57,254 incurred by the assessed on purchase of articles which were presented as gifts to customers, dealers, etc., was an allowable deduction by ignoring the material facts that the assessed could not give the names of the persons to whom these articles were the carrying on of his business ?

9. Whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct in law in holding that a sum of Rs. 1,45,000 disallowed by the Income-tax Officer as representing capital expenditure incurred on pipelines which never belonged to the assessed was an allowable revenue expenditure ?

10. whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct in law in holding that the donation of Rs. 85,406 to the school which was not the property of the assessed was an allowable deduction by ignoring the principles laid down by the Delhi High Court in the case of Raza Sugar Company Ltd. [1981] 130 ITR 421 ?

2. With regard to question Nos. 1 and 2 it is agreed by learned counsel for the parties that question No. 2 would cover question No. 1 We also find the parties that in I.T.C. No. 166 of 1983, a question similar to question No. 2 was referred by order dated March 26, 1987. Therefore, question No. 2 should be referred.

3. As far as question No. 3 is concerned, vide order dated July 23, 1987, in ITC No. 157 of 1983, this court in respect of the assessment year 1975-76, declined to call for a reference. Following the said decision, we feel that no reference need be called in respect of this question.

4. As far as question No. 4 is concerned, we feel that the same is a question of law and reference in respect thereof should be called. Similarly reference should be called in respect of question No. 5.

5. As far as question No. 6 is concerned. The same is a question of law and been called for in I.T.C. No. 166 of 1983 though the figure should be Rs. 4,60,171 instead of Rs. 6,64,147.

6. As far as question No. 7 is concerned, counsel for the parties state that the figure should be Rs. 30,313. In view of the fact that the Tribunal has referred to two different decisions and distinguished the same in order to arrive at the conclusion that the expenditure incurred is of revenue nature and not capital expenditure, we feel that the said question is a question of law.

7. As far as question No. 8 is concerned, learned counsel for the Revenue refers to Gannon Dunkerley's case and submits that, because the names of the persons to whom presents were given had not been disclosed. The amount was not allowable as a revenue deduction. We find that the Tribunal has found as a fact that "full details of the expenditure incurred through has found as a fact that assessed-company has been filed. The expenses have been incurred on account this dealers and agents, etc., at different places. The only purpose of incurring this expenditure is to increase the business". In view of the aforesaid finding, namely, that the expenditure was incurred for the purpose of business, we are of the opinion that the question is a question of fact and not one of low.

8. The answer to question No. 9 is self-evident in view of the decision of this court in Hindustan times Ltd. v. CIT [1980] 122 ITR 977 and that of the Supreme Court in CIT v. CIT Associate Cement Companies Ltd. [1987] 172 ITR 257. As far as question No. 10 is concerned the Tribunal has found as a fact that the school to which donation had been given had admitted the children of the workers and employees of their company and , in fact the majority of the students were children of the workers. The Tribunal pointed out that similar donation had. In the conclusion of the Tribunal the donation which was given was for the purpose of business is a question of fact.

9. We, accordingly, direct the Tribunal to state the case refer the following question of law to this court :

"1. Whether, on the fact and in the circumstance of the case, the Income-tax Appellate Tribunal was correct in law in holding that the entire expenditure of Rs. 5,95,923 was expenditure of revenue nature following their decision for the assessment year 1973-74 which has not been accepted by the Department ?

2. Whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct in law in holding that the expenditure of Rs. 11,928 incurred on repairs of Shiv Temple at Nagda was incidental to the assessed's business and thereby directing that this amount should be allowed as an expenditure ?

3. Whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct in law in reducing the disallowance of Rs. 20,000 confirmed by the Commissioner of Income-tax (Appeals) to Rs. 7,000 under the head Entertainment expenses ?

4. Whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct both on facts and in law in directing that weighted deduction on a sum of Rs. 4,60,171 should be allowed of capital nature ?

5. Whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal was correct in law in holding that the entire expenditure of Rs. 30,313 incurred in the shifting was not an expenditure of capital ?"

10. The petition is disposed of. There will be no order as to costs.