Commissioner Of Income-Tax vs J.K. Synthetics Ltd.
1995 Latest Caselaw 719 Del

JUDGMENT

Dr. M.K. Sharma, J.

1. This petition under section 256(2) of the Income-tax Act, 1961, has been preferred by the Revenue seeking to refer the following questions, to this court for its opinion, relevant to the assessment year 1983-84 :

"(1) 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 incurred after April 6, 1982, represents revenue expenditure ?

(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in enlarging the claim of the assessee for Rs. 54,08,995 which was capitalised by the assessee himself in his books of account and was claimed as such in his return of income ?"

2. The assessee, during the relevant year of assessment, set up its cement unit-III in which the raw mill was commissioned on April 6, 1982. The kiln unit was commissioned on July 28, 1982, and the cement production unit started from December 18, 1982. Expenses for the period from July 28, 1982, to December 17, 1982, amounted to Rs. 1,32,63,868, out of which the assessee capitalised expenditure of Rs. 54,08,994 and claimed the remaining amount of Rs. 78,54,891 as revenue expenditure. The Income-tax Officer, at the time of assessment, rejected the assessor's claim holding that it related to the period before the production of cement unit-III commenced. The issue regarding expenses of Rs. 54,08,994 was not examined by the Income-tax Officer as the assessee had itself capitalised the expenditure. The assessee preferred an appeal to the Commissioner of Income-tax, who held that the business of the assessee-company commenced on April 6, 1982, when the raw mill was commissioned and the expenditure thereafter would be eligible for deduction as revenue expenditure. The Commissioner of Income-tax (Appeals) declined to enlarge the scope of the appeal by including that part of the expenditure which was capitalised by the assessee and he confined himself only to the disallowance made by the Income-tax Officer. On further appeal by the assessee, the Income-tax Appellate Tribunal upheld the finding of the Commissioner of Income-tax (Appeals) that the cement unit had been commissioned on April 6, 1982, and the expenditure incurred thereafter would be eligible for deduction as revenue expenditure. The Tribunal, however, held that it was open to the assessee to enlarge the claim and therefore, the Commissioner of Income-tax (Appeals) could have entertained such claims. However, the Tribunal did not give any specific direction on the aforesaid capitalised amount of Rs. 54,08,994 in the order of appeal. The same was, however, included in the order passed in the miscellaneous application filed by the assessee against an application under section 256(1) was filed by the Revenue which was rejected by the Tribunal. Hence, this petition.

3. We have examined the question and heard learned counsel for the parties and also examined the order passed by the Tribunal under section 256(1) of the Act also the order passed by the Tribunal on the miscellaneous application out of which the aforesaid questions are stated to have arisen.

4. On a consideration of the entire facts and circumstances of the case, we are satisfied that a question of law does arise out of the aforesaid order passed by the learned Tribunal but the questions, as framed by the Revenue, appear to us to have not been properly framed. Therefore, in exercise of our powers we reframe the question of law that arises for consideration, which, in our opinion, is a question of law and is referable to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that expenditure of Rs. 54,08,995 was allowable as revenue expenditure having been incurred after April 6, 1982 ?"

5. In the result, we direct the Tribunal to refer to this court the aforesaid reframed question of law along with a statement of case for its opinion. The petition stands allowed to the extent indicated above.