Delhi High Court
J.K. Synthetics Ltd. vs Commissioner Of Income-Tax, ... on 13 July, 1989
Equivalent citations: 1989 (24) ECR 640 Delhi
Author: B Kirpal
Bench: B Kirpal, C Chaudhry
JUDGMENT
B.N. Kirpal, J.
1. The petitioner has filed the present petition under Section 256(2) of the Income Tax Act seeking reference of following 13 questions to this Court:
1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in sustaining an ad hoe disallowance of Rs. 10,00,000 out of expenditure on repairs to machinery in the present case?
2. Whether the Tribunal's finding sustaining the disallowance of Rs. 10,00,000 out of repairs to machinery is vitiated by absence of any material for the ad hoe estimate made in this behalf by the Tribunal?
3. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in sustaining the disallowance of Rs. 10,00,000 out of repairs to machinery by applying a method other than the method of accounting regularly followed by the assessed company and always accepted by the department in past?
4. If the answer to question No. 3 is in the affirmative whether on the facts and in the circumstances of the case, the method adopted by the Tribunal for maintaining the disallowance of Rs. 10,00,000 out of repairs to machinery is legally unsustainable for its failure to take into account the opening as well as the closing stocks of the relevant spare parts and not only closing stocks as considered by the Tribunal.
5. Whether on the facts and in the circumstances of the case and on a correct interpretation of the provisions of Sections 38(2), 32 and 33 of the Income-tax Act, 1961, the Tribunal was correct in law in holding that 50% of the depreciation and the entire amount of development rebate in respect of machinery owned and installed by the assessed company for testing purposes in the premises of J.K. Cotton Spg. & Wvg. Mills Co. Ltd., were not allowable as deductions in the present case?
6. Whether on the facts and in the circumstances of the case and on a correct interpretation of the provisions of Sections 38(2), 32 and 33 of the Income-tax Act, 1961, the Tribunal was correct in law in holding that no depreciation and development rebate was allowable in the present case in respect of machinery owned and installed by the assessed company in the premises of M/s. Plastic Products Ltd.
7. Whether on the facts and in the circumstances of the case the Tribunal was correct in holding that the expenditure of Rs. 30,586 and Rs. 2,37,559 incurred on account of Traveling expenses represented capital expenditure and not revenue expenditure?
8. Whether on the facts and in the circumstances of the case, the Tribunal was justified in disallowing foreign Traveling expenses of Rs. 1,02,620 and excess baggage charges of Rs. 14,668/-?
9. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the expenditure of Rs. 52,782 incurred on automatic traffic signals for purposes of advertisement and publicity, was capital expenditure and not revenue expenditure?
10. Whether on the facts and in the circumstances of the case, the Tribunal was right in upholding the disallowance of Rs. 38,361 in respect of expenditure incurred in India under the head "Traveling and Conveyance Expenses"?
11. Whether on the facts and in the circumstances of the case, the Tribunal was correct in holding that 50% of the expenditure on maintenance of Kamla Retreat was not allowable as business expenditure in the present case?
12. Whether on the facts and in the circumstances of the case, the Tribunal was justified in declining to admit and adjudicate upon Ground No. 17 in the grounds of appeal filed before the Tribunal?
13. Whether on the facts and in the circumstances of the case, the Tribunal's decision refusing to admit ground No. 17 in the grounds of appeal filed before the Tribunal, is vitiated by erroneous and irrelevant considerations and a failure to correctly apply the relevant legal provisions and judicial pronouncements?
2. Question Nos. (1) to (4) pertain to the same disallowance, namely, the ad hoe disallowance of Rs. 10,00,000 out of expenditure incurred on repairs to machinery. The question as to how much expenditure should be disallowed is always a question of estimate and a question of fact. We, therefore, do not see any justification for referring these questions.
3. Question Nos. (5) and (6) also cannot be directed to be referred because the Tribunal had invoked the provisions of Section 38 and had found as a fact that those provisions are applicable. This is a finding of fact and no question of law arises because the expenditure which were incurred have actually been apportioned in terms of Section 38.
4. As regards Question No. 7 is concerned, the assessed's representative undertook foreign travel, part of the expenses were disallowed by the ITO, and upheld by the Tribunal, by holding that the same represented capital expenditure. The question as to whether an expenditure is capital or revenue, on the facts found by the Tribunal, is at least a mixed question of fact and law, if not a question of law. Therefore, the said question should have been referred.
5. We find that Question Nos. 8, 10, 12 & 13 are also questions which cannot be referred. Question Nos. 8 & 10 refer to an estimate by the Tribunal with regard to disallowance, and the learned Counsel for the petitioner does not press the Question Nos. 12 &13. Therefore, it is not necessary to direct the same being referred.
6. As regards Question No. (9) is concerned, we find that the question as to whether the expenditure incurred on advertising on traffic signals is a revenue expenditure or not is a question of law.
7. Question No. (11) is similar to the one which was directed to be referred by the Allahabad High Court in respect of Assessment Year 1975-76 in 1TA 160186 following the said decision, this question should also be referred.
8. For the aforesaid reasons, we direct the Tribunal to state the case and refer the following questions of law to this Court:
(1) Whether on the facts and in the circumstances of the case the Tribunal was correct in holding that the expenditure of Rs. 30,586/- and Rs. 2,37,559 incurred on account of Traveling expenses represented capital expenditure and not revenue expenditure?
(2) Whether on the facts and in the circumstance of the case, the Tribunal was correct in law in holding that the expenditure of Rs. 52,782 incurred on automatic traffic signals for purposes of advertisement and publicity, was capital expenditure and not revenue expenditure?
(3) Whether on the facts and in the circumstances of the case, the Tribunal was correct in holding that 50% of the expenditure on maintenance of Kamla Retreat was not allowable as business expenditure in the present case?
