Delhi High Court
Cit vs National Chemical Industries on 29 July, 2004
Equivalent citations: 2005 142 TAXMAN 400 Delhi
Author: B Patel
JUDGMENT
B.C. Patel, C.J.
At the instance of the revenue, the Income Tax Appellate Tribunal has referred the following question:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the payment of Rs. 73,723 was business expenditure under section 36(1)(iii) of the Income Tax Act, 1961, when there was no actual capital borrowed for the purposes of the business ?"
2. In the question, it transpires that by mistake, it is mentioned as section 36(1)(ii), but it should be read as 36(1)(iii). In the opinion of the court, the aforesaid question does not arise in the instant case. It is clear from the finding recorded by the Tribunal that the assessed firm was allotted an industrial plot at Faridabad for Rs. 30 lakhs by the State Government. The price of the plot was Rs. 13,16,480.20% of the price was payable at the time of allotment and the balance was to be paid in 10 equal Installments carrying an interest of 7% per annum. The interest of Rs. 73,723 was paid by the assessed firm Along with the first Installment. The assessed in his return claimed that the said amount is required to be allowed under section 37 of the Income Tax Act, 1961 as allowable business expenditure because it was in the nature of the revenue expenditure.
2. In the question, it transpires that by mistake, it is mentioned as section 36(1)(ii), but it should be read as 36(1)(iii). In the opinion of the court, the aforesaid question does not arise in the instant case. It is clear from the finding recorded by the Tribunal that the assessed firm was allotted an industrial plot at Faridabad for Rs. 30 lakhs by the State Government. The price of the plot was Rs. 13,16,480.20% of the price was payable at the time of allotment and the balance was to be paid in 10 equal Installments carrying an interest of 7% per annum. The interest of Rs. 73,723 was paid by the assessed firm Along with the first Installment. The assessed in his return claimed that the said amount is required to be allowed under section 37 of the Income Tax Act, 1961 as allowable business expenditure because it was in the nature of the revenue expenditure.
3. The Tribunal, after examining the provisions contained in section 10(2)(xv) of the Income Tax Act, 1922, which is in pari materia to section 37 of the present Act, ultimately held as under:
3. The Tribunal, after examining the provisions contained in section 10(2)(xv) of the Income Tax Act, 1922, which is in pari materia to section 37 of the present Act, ultimately held as under:
'Therefore, we direct that the interest of Rs. 73,723 should be allowed to the assessed as revenue expenditure."
4. Reading the decision of the Tribunal, it transpires that the direction after quoting section 10(2)(xv) of the 1922 Act is with reference to section 37 and not section 36(1)(iii) of the present Act and the finding is also very clear. In view of the fact that the benefit is granted under section 37 by allowing the same as revenue expenditure, the court is of the opinion that the question which is framed by the Tribunal at the instance of the revenue does not arise at all in the circumstances of the present case. Hence, the reference is disposed of unanswered.
4. Reading the decision of the Tribunal, it transpires that the direction after quoting section 10(2)(xv) of the 1922 Act is with reference to section 37 and not section 36(1)(iii) of the present Act and the finding is also very clear. In view of the fact that the benefit is granted under section 37 by allowing the same as revenue expenditure, the court is of the opinion that the question which is framed by the Tribunal at the instance of the revenue does not arise at all in the circumstances of the present case. Hence, the reference is disposed of unanswered.
