Commissioner Of Income-Tax vs Printers House (P.) Ltd.
2000 Latest Caselaw 954 Del

JUDGMENT

Arijit Pasayat, C.J.

1. These two applications involve identical questions and are, therefore, being disposed of by this common order. At the instance of the Revenue, the following questions have been referred under Section 256(1) of the Income-tax Act, 1961 (in short "the Act"), by the Income-tax Appellate Tribunal, Delhi Bench "A" (in short "the Tribunal"), for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct in holding that the sum of Rs. 5,000 is not disallowable as entertainment expenditure within the meaning of Section 37(2B) ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct in holding that the sum of Rs. 3,835 is not disallowable as expenditure incurred in connection with a criminal proceeding ?

3. Whether, on the facts and in the circumstances of the case and on a proper interpretation of the collaboration agreement dated June 9, 1961, the Tribunal is legally correct in holding that the entire payment of 1,25,000 Dutch guilders was for the acquisition of patent rights by the asses see-company ?"

2. We need not go into the factual aspects in detail in view of the fact that the first question relatable to entertainment expenditure within the meaning of Section 37(2B) has been dealt with in detail by the apex court in CIT v. Patel Bros and Co. Ltd. [1995] 215 ITR 165. Following the view expressed in said case, we answer the first question in the affirmative, in favour of the assessee and against the Revenue.

3. So far as the second question is concerned, we find that the Tribunal has as a matter of fact found that the legal expenses were incurred for submitting reply to show-cause notice issued by the customs authorities, The expenses have been held not to be relatable to any criminal proceeding. In our view, the conclusion of the Tribunal is well founded because at the show cause stage, the authorities are empowered to accept the show cause reply and drop the proceedings. Further action is taken pursuant to adjudication in the show cause matter. The proceeding cannot be said to be really of the nature of a criminal proceeding.

4. In view of the factual conclusion arrived at by the Tribunal, we answer the question in the affirmative, in favour of the assessee and against the Revenue.

5. So far as the third question is concerned, an identical issue was considered by this court in I. T. R. No. 271 of 1978 and 51-53 of 1979 in the assessee's own case (CIT v. Printers House Pvt. Ltd. [2000] 246 ITR 663). The question was not answered as adequate material, more particularly the agreement in question, did not form part of the record. We follow a similar course.

6. The reference applications are accordingly disposed of.