S.P.G.C. METAL INDUSTRIES (P.) LTD, VS COMMISSIONER OF INCOME-TAX, 1992 PTD-MADRAS-HIGH-COURT-INDIA 834 (1990)

Income-tax---

----Reference---Application to High Court to direct reference---Condition precedent---Tribunal should have declined to state a case on the ground that no question of law arose---Rejection of reference application as time-barred-- Application to High Court to direct reference not competent.

In order to maintain an application under section 256(2) of the Indian Income Tax Act, 1961, an application under section 256(1) of the Act should have been made either by the assessee or by the Commissioner, as the case may be, after fulfilling the requirements of that provision and on such an application, the Tribunal should have declined to state a case on the ground that no question of law arises. Though the rejection of the application under section 256(1) of the Act as time-barred may result in the Tribunal not stating a case, yet, that cannot be construed to be a refusal on the ground that no question of law arose, which is a fundamental requirement to maintain an application under section 256(2). Under section 66(3) of the Indian Income Tax Act, 1922, a specific provision had been made to the effect that if an application made under section 66(1) of the Indian Income Tax Act, 1922, was rejected on the ground that it was time-barred, the assessee or the Commissioner, as the case may be, may, within two months from the date of service of notice of rejection, apply to the High Court and the High Court, if it is not satisfied with the correctness of the Appellate Tribunal's decision, may require the Appellate Tribunal to treat the application as made within the time allowed under subsection (1) of section 66. There is no corresponding provision in the Indian Income Tax Act, 1961, and the absence of such a provision is indicative of not only a deliberate departure from the comparable provisions of the Indian Income-tax Act, 1922, but also that an application under section 256(2) of the Act to the High Court is contemplated only in cases where there is refusal on the part of the Tribunal to state a case on the ground that no question of law arose and not in cases where the rejection of the reference application by the Tribunal is on the ground that it is time- barred.

S.P. Jaiswal v. CIT (1969) 73 ITR 179 (P&H); Govind Singh Bhagwan Singh v. ITO (1972) 84 ITR 214 (All.) and Prem Narain Kherana v. CIT (1986) 162 ITR 297 (All.). fol.

Bhasker for K. Mani and M. Krishna Kumar for the Petitioners.

C. V. Rajan for the Respondents.

JUDGMENT

RATNAM, J.--- The petitioner-assessee, in these petitions, is a private limited company. While finalising the assessment for the assessment year 1982-83, the Income Tax Officer disallowed a sum of Rs. 8,431 representing part of the interest paid to the directors on their credit balances in the current account under section' 40A(8) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and added that amount to the total income of the petitioner-assessee. Considering the claim of the assessee for depreciation, the income-tax Officer disallowed normal depreciation to the extent of Rs. 16,860 and additional depreciation to the extent of Rs. 6,225 by reducing the cost of the assets by the amount of the Central subsidy received by the assessee through SIPCOT. The claim of the assessee for investment allowance in a sum of Rs. 20,750 was also disallowed. Similarly, for the assessment year 1983 84, under section 40A of the Act, the Income-tax Officer disallowed interest in a sum of Rs. 10,544 and also depreciation claimed in a sum of Rs. 32,231. On appeal to the Commissioner of Income-tax (Appeals), the disallowance of Rs.8,431 and Rs. 10,544 under section 40A(8) of the Act was deleted and the claim for depreciation as made by the assessee was accepted. On further appeal to the Tribunal, it restored the disallowance under section 40A(8) of the Act and the order of the Income-tax Officer in that regard. However, the order of the Commissioner of Income-tax (Appeals), regarding depreciation was confirmed by the Tribunal. The Tribunal passed the orders as aforesaid on March 21, .1986. It is not in dispute that notice of the order of the Tribunal under section 254 of the Act was served on the petitioner-assessee on May 15 1986, and that the last day for filing a reference application under section 256(1) of the Act was July 14, 1986. Admittedly, the petitioner assessee filed the reference applications under section 256(1) of the Act out of time and sought condonation of the delay in the filing of those applications b) attempting to explain the reasons for the delay. Eventually, the Tribunal, by it, order dated January 6, 1987, rejected the reference applications filed by that petitioner as time-barred. Against that, the petitioner has filed these petition purporting to be under section 256(2) of the Act praying that a direction should be issued to the Tribunal to state a case referring the two questions o law set out in the reference applications.

Learned counsel for the Revenue, inviting attention to section 66(1) to (3) of the Indian Income-tax, 1922, and section 256(1) to (3) of the Act, contended that under the Act, there is no provision corresponding t section 06(3) of the Indian Income-tax Act, 1922, and that, in this case the Appellate Tribunal had not refused to state a case on the ground that no question of law arises, but had rejected the applications as time-barred and, therefore, the reference applications filed by the petitioner are not maintainable and deserve dismissal. Reliance in this connection was also placed by learned counsel for the Revenue upon the decisions in S. P. Jaiswal v. CIT (1972) 73 ITR 179 (P & H), Govind Singh Bhagwan Singh v. ITO (1972) 84ITR 214 (All.) and Prem Narain Khurana v. CIT (1986) 162 ITR 297 (All.).

In order to maintain an application under section 256(2) of the Act, an application under section 256(1) of the Act should have been made either by the assessee or by the Commissioner; as the case may be, after fulfilling the requirements of that provision and on such an application, the Tribunal should have declined to stare a case on the ground that no question of law arises. We find in this case that though the petitioner, purported to make applications under section 256(1) of the Act before the Tribunal, the Tribunal has refrained from passing any order on the merits of the claim for references and the question whether a case should be stated or not stated, has not been gone into. Besides, the Tribunal has also not stated that questions sought to be referred by the petitioner are not questions of law. On the other hand, the Tribunal merely proceeded to reject the reference applications filed by the petitioner on the ground that they were time-barred. Though the rejection of the applications under section 256(1) of the Act as time-barred may result in the Tribunal not stating a case, yet, that cannot be construed to be a refusal on the ground that no question of law arose, which is a fundamental requirement to maintain an application under section 256(2) of the Act. We may also in this context refer to section 66(3) of the Indian Income Tax Act, 1922. Thereunder, a specific provision was made to the effect that if an application made under section 66(1) of the Indian Income-tax Act, 1922, was rejected on the ground that it was time-barred, the assessee or the Commissioner, as the case may be, may, within two months from the date of service of notice of rejection, apply to the High Court and the High Court, if it is not satisfied with the correctness of the Appellate Tribunal's decision, may require the appellate Tribunal to treat the application as made within the time allowed under subsection (1) of section 66 of the Indian Income Tax Act, 1922. There is no corresponding provision in the Act and the absence of such a provision is indicative not only of a deliberate departure from the comparable provisions of the Indian Income Tax Act, 1922, but also that an application under section 256(2) of the Act to the High Court is contemplated only in cases where there is a refusal on the part of the Tribunal to state a case on the ground that no question of law arose and not in cases where the rejection of the reference application by the Tribunal is on the ground that it is time-barred.

We may now make a brief reference to the decisions to which our attention was drawn. In S. P. Jaiswal v. CIT [1969] 73 ITR 179 (P & H), it was laid down that a person aggrieved by an order of the Tribunal refusing to make a reference on any ground other than the one to the effect that no question of law arises in the case has certainly no right to invoke section 66(2) of the Indian Income-tax Act, 1922, or section 256(2) of the Act. In Govind Singh Bhagwan Singh v. ITO [1972] 84 ITR 214 (All.), the reference applications filed by the assessee under section 256(1) of the Act were rejected as barred by time and while dealing with the maintainability of the reference applications under section 256(2) of the Act, the Court held that the applications under section 256(2) of the Act were not maintainable as there was no refusal on the part of the Appellate Tribunal to state a case on the ground that no question of law arose. To similar effect is the decision reported in Prem Narain Khurana v. CIT (1986) 162 ITR 297 (All.) where it was pointed out, after referring to section 66 of the Indian Income-tax Act, 1922 section 256 of the Act, that section 256(2) of the Act contemplates an application only in such cases where in an application made under section 256(1) of the Act, the Tribunal declined to state a case on the ground that no question of law arose and that section 66(1) and (2) of the Indian Income-tax Act, 1922, are in pari materia with section 256(1) and (2) of the Act with a very vital and material distinction in that while section 06(3) of the Indian Income Tax Act, 1922, contemplated an application to the High Court even in those cases where the Appellate Tribunal had rejected an application under section 66(1) of the Indian Income I Tax Act, 1922, on the ground that it was barred by time, there was no corresponding provision incorporated or included in section 256 of the Act and that clearly is a pointer that an application under section 256(2) of the Act to the High Court was contemplated only in such cases where there was a refusal on the part of the Tribunal to state a case on the ground that no question of law arose and not in cases where the Tribunal rejected the application on the ground that it was barred by time. The view we have expressed in the earlier portion of this order is fully fortified by the decisions referred to above. We, therefore, hold that the applications for references filed by the petitioner assessee under section 250(2) of the Act are not competent and maintainable and deserve dismissal. The reference applications are, therefore, dismissed with costs, one set. Counsel's fee Rs. 250.

M.B.A./1547/TApplications dismissed.