Commissioner Of Income-Tax vs J.K. Synthetics Ltd. (No. 2)
1989 Latest Caselaw 166 Del

JUDGMENT

B.N. Kirpal, J.

1. In this petition under section 256(2) of the Income-tax Act, the petitioner seeks a direction to the effect that the Tribunal should be asked to refer the following questions of law to this court :

(i) Whether the Income-tax Appellate Tribunal was correct in Law and on facts in deleting the disallowance of Rs. 85,722 on account of interest pertaining to period prior to commencement of production in respect of acrylic, cement, SSF and nylon type cord plants on the basis of their own order for the assessment year 1971-72 when the order for the assessment year 1971-72 has not been accepted by the Department ?

(ii) (a) Whether the Income-tax Appellate Tribunal was correct in law and on facts in holding that the machinery installed by the assessed in the premises of JKCM admittedly used by the said company for the manufacture of their products, viz., nylon and cotton fabrics, was used by the assessed for its own business to the extent of 50% ?

(b) Whether the finding of the Income-tax Appellate Tribunal that the machinery installed by the assessed in the premises of JKCM admittedly used by the said company for the manufacture of their produce, viz., nylon and cotton fabrics, was used by the assessed for its own business to the extent of 50% is based on a relevant finding or is based on surmise, conjectures and presumptions and partly irrelevant material ?

(iii) Whether the Income-tax Appellate Tribunal was correct in law and on facts in holding that the assessed is entitled to full insurance charges on the machinery installed in the premises of JKCM when, in assessment year 1975-76, on similar facts, the Income-tax Appellate Tribunal have confirmed the disallowance to the extent of 50% ?

(iv) Whether the Income-tax Appellate Tribunal was correct in law and on facts in confirming the order of the Commissioner of Income-tax (Appeals) in directing the Income-tax Officer to allow development rebate o all the units at the rate of 25% in view of the Income-tax Appellate Tribunal's decision for the assessment year 1971-72 ? In fact, these units did not fall under the category of priority industries within the meaning of section 33(1)(b)(B)(i) of the Income-tax Act, 1961 ?

(v) Whether the Income-tax Appellate Tribunal was correct in law and on facts in confirming the order of the Commissioner of Income-tax (Appeals) in deleting the disallowance of Rs. 5,11,597 treated as income of the assessed on account of security deposit of cops ?

(vi) Whether the Income-tax Appellate Tribunal was correct in law and on facts in holding that the addition of Rs. 20 lakhs made on account of estimated closing stock of cops was made only on the basic of surmises and thereby deleting the said addition ?

(vii) Whether the Income-tax Appellate Tribunal was correct in law and on facts in conferring the order of the Commissioner of Income-tax (Appeals) in dealing the amounts of Rs. 18,894 and Rs. 14,182 on account of foreign tour expenses of personal assistants to executives and personal assistants to directors, respectively ?

(viii) Whether the Income-tax Appellate Tribunal was correct in law and on facts in deleting the disallowance of Rs. 75,263 on account of presentation to foreign business associates when in fact there is no nexus between such expenses and the carrying on of the assessed's business ?

(ix) Whether the Income-tax Appellate Tribunal was correct in law and on facts in confirming the order of the Commissioner of Income-tax (Appeals) in deleting the addition of Rs. 1,90,055 out of legal charges by following the Income-tax Appellate Tribunal's order for the assessment year 1971-72, which has not been accepted by the Department ?

(x) Whether the Income-tax Appellate Tribunal was correct in law and on facts in confirming the order of the Commissioner of Income-tax (Appeals) in holding that the assessed is entitled to relief under section 80J in respect of Nylon Unit-II in view of the decision of the Supreme Court in Lohia Machines Ltd., When, in fact, the issue involved in this case is regarding admissibility of the claim and not the working out of the quantum of deduction under section 80J ?

(xi) Whether the Income-tax Appellate Tribunal was correct in law and on facts in confirming the order of the Commissioner of Income-tax (Appeals) in directing the Income-tax Officer to make a fresh computation of depreciation allowance on the assets used for scientific research in the light of the judgment of the Supreme Court when, in fact, section 35(2)(iv) clearly provided for disallowance of such a claim ?

(xii) Whether the Income-tax Appellate Tribunal was correct in law and on facts in directing the Income-tax Officer to allow depreciation on SSF and tyre cord units at the rate of 15%, as against 10%, allowed by the Income-tax Officer, on the basis of their own order for the assessment year 1971-72, when the Income-tax Appellate Tribunal's order of the assessment year 1971-72 was not applicable, since both these units were added only in this year ?

(xiii) Whether the Income-tax Appellate Tribunal was correct in law and on facts in deleting the addition of Rs. 20,09,620 on account of deduction in first grade production on the basis of their own order for he assessment year 1971-72, when, in fact, the order for the assessment year 1971-72 has not been accepted by the Department ?

2. In our opinion, only questions Nos. (i), (iii), (v), (ix) and (xii) should be referred.

3. With regard to question No. (i), we direct that the same should be reworded in the manner as will be presently indicated.

4. With regard to questions Nos. (ii)(a) and (b), for the reasons stated in our judgment while, disposing of ITC No. 136 of 1985 (CIT V. J. K. Synthetic Ltd. (No. 1) [1990] 181 505), we are of the opinion that these two questions of law do not arise. Similar is the position with regard to question No. (iv). Question No. (vi) is a pure question of fact because it deals with an estimate which has been arrived at on surmises and which had been ordered to be deleted by the Tribunal, No principle of law is involved in deciding the question. Similarly, question No. (vii) which pertains to foreign expenses which have been incurred for the purposes of business tour in respect of personal assistants to the executives and to the directors is also a question of fact especially when, we are informed that the expenses incurred by these executives and directors have been allowed. Question No. (viii) pertains to disallowance which had been made by the Income-tax Officer, which has been deleted in appeal on account of foreign business of the assessed. It cannot be denied that, for the purpose of business, presents were are given to foreign business associates and merely because full details were not given, it cannot be a reason for coming to the conclusion that at question of law arises when such disallowance is deleted by the appellate authority.

5. For the reasons stated in our judgment in ITC No. 136 of 1985 (CIT v. J. K. Synthetics Ltd. (No. 1) [1990] 181 ITR 505), question No. (x) is also not directed to be referred as the answer to be same is self-explanatory. Questions Nos. (xi) and (xiii) also are not to be referred. As regards question No. (xi) is concerned, the Income-tax Appellate Tribunal has directed the Income-tax Officer to follow the judgment of the Supreme Court and it cannot be said that any question of law arises in respect thereto. As regards question No. (xiii), the Allahabad High Court, in respect of the assessment year 1971-72, has come to the conclusion that the said question is a question of fact an need not be referred. Following the said decision, we decline to ask for a reference in respect thereto.

6. Accordingly, we direct the Tribunal to state the case and refers the following questions to this court :

(i) Whether the Income-tax Appellate Tribunal was correct in law and on facts in deleting the disallowance of Rs. 85,722 on account of interest pertaining to period prior to commencement of production in respect of acrylic, cement, SSF and nylon tyre cord plants ?

(iii) Whether the Income-tax Appellate Tribunal was correct in law and on facts in holding that the assessed is entitled to full insurance charges on the machinery installed in the premises of JKCM when in assessment year 1975-76, on similar facts, the Income-tax Appellate Tribunal have confirmed the disallowance to the extent of 50% ?

(v) Whether the Income-tax Appellate Tribunal was correct in law and on facts in confirming the order of Commissioner of Income-tax (Appeals) in deleting the disallowance of Rs. 5,11,597 treated as income of the assessed on account of security deposit of cops ?

(ix) Whether the Income-tax Appellate Tribunal was correct in law and on facts in confirming the order of the Commissioner of Income-tax (Appeals) in deleting the addition of Rs. 1,90,055 out of legal charges ?

(xii) Whether the Income-tax Appellate Tribunal was correct in law and on facts in directing the Income-tax Officer to allow depreciation on SSF and tyre cord units at the rate of 15% as against 10% ?

7. The petition is disposed of. No costs.