COMMISSIONER OF INCOME-TAX VS RAHUL STEEL FORGINGS (PVT) LTD., 1998 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 1421 (1996)

Income-tax---

----Reference---Conclusions of Tribunal based on appreciation of facts---Do not give rise to any question of law---Indian Income Tax Act, 1961, S.256(2).

The assessee derived income from manufacture and sale of scooter parts. Out of the total sales return of Rs.5,56,065, the assessee was unable to prove the sales return of Rs.62,685 and, consequently, the sales return was disallowed by the Income-tax Officer to this extent. The Assessing Officer also disallowed a claim of Rs.30,722 towards technical consultancy charges for preparation of a techno-economic feasibility report for the expansion of the company and held it to be capital expenditure. The Assessing Officer also disallowed the claim to deduction in respect of a bad debt. The assessee failed before the Commissioner of Income-tax (Appeals) also. However, the appeal of the assessee was allowed by the Tribunal in part. The Tribunal refused to refer the questions sought by the Commissioner on the ground that they were of fact. On an application to direct reference:

Held, that the questions for reference as proposed did not arise as questions of law as the conclusions of the Tribunal were based on appreciation of the facts.

CIT v. Ashoka Marketing Ltd. (1976) 103 ITR 543 (SC); CIT v. Kotrika Venkataswamy & Sons (1971) 79 ITR 499 (SC) and Indian Oxygen Ltd. v. CIT (1987) 164 ITR 466 (Cal.) ref.

D.D. Vyas for the Commissioner

K.N. Puntambekar for the Assessee

JUDGMENT

A.R. TIWARI, J.---The applicant (Commissioner of Income-tax Bhopal), has filed this application under section 256(2) of the Income Tax Act, 1961 (for short "the Act"), seeking direction to the Tribunal to state the case and to refer the under noted questions, categorized as of law, arising out of the order, dated May 8, 1991, passed by the Tribunal in Income-tax Appeal No.363/Ind of 1986 after rejection of the application on February 7, 1992, registered as Revision Application No.423/Ind of 1991, for the assessment year 1982-83, for our consideration and opinion:

"(1)Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in allowing the claim of sales returns when the nexus between the same and sale of scrap was not established by the assessee with evidence?

(2)Whether, on the facts and in the circumstances of the case, the expenditure for feasibility report of Rs.30,722 paid to Mirloskar Consultants Limited was a revenue expenditure?

(3)Whether, on the facts and in the circumstances of the case, the claim of bad debt by the assessee was allowable in the acc6unting period relevant to the assessment year 1982-83?

(4)Whether the Income-tax Appellate Tribunal was justified in holding that the burden was on the Department to establish the year in which the debts had become bad?

(5)Whether, on the facts and in the circumstances of the case, the charging of interest under section 217 on ITNS-150 and inclusion thereof in the demand notice are not conclusive evidence in support of charging of interest directed in the assessment order when these documents are part of the assessment order under section 143(3) and whether the Income-tax Appellate Tribunal is justified in deleting the interest in question?"

Briefly stated, the facts of the case are that the non applicant/assessee-company derives income from manufacture and sale of scooter parts mainly from Bajaj Auto. On examination of accounts, the Income-tax Officer found that out of total sales return of Rs.5,56,065 an amount of Rs.62,685 pertained to Gajra Gears (Pvt.) Ltd. The Assessing Officer required the assessee to establish the utilization of this amount. The assessee failed to explain the same. The assessee admitted, as is clear from order-sheet, dated March 12, 1985, that there was no evidence to prove the sales return of Rs.62,685. The Income-tax Officer, therefore, disallowed the sales return to this extent. The assessee also claimed technical consultancy charges of Rs.30,722, incurred allegedly by it for preparation of techno economic feasibility in connection with the expansion of the company. The Assessing Officer disallowed this claim also and held it to be a capital expenditure. The Assessing Officer also disallowed the claim of bad debt. Aggrieved, the assessee filed an appeal before the Commissioner of Income tax (Appeals) which was dismissed. The assessee then filed an appeal before the Tribunal. The Tribunal allowed the appeal in part on May 8, 1991. The Department then filed an application seeking statement of the case. The application was dismissed on February 7, 1992. The Department then filed this application under section 256(2) of the Act.

We have heard Shri D.D. Vyas, learned counsel for the applicant/Department, and Shri K.N. Puntambekar, learned counsel for the non-applicant/assessee.

We have perused the order dated February 7, 1992. The Tribunal held that question No.l was a finding of fact and was not accordingly a referable question of law. As regards question No.2, the Tribunal held that the finding is based on appreciation of facts placed on record and is supportable by the decision of Indian Oxygen Ltd. v. CIT (1987) 164 ITR 466 (Cal.) which in turn had considered as many as 16 cases of various High Courts and two decisions of the apex Court. As regards questions Nos.3 and 4, the Tribunal held on examination of the facts that certain bad debts, as claimed by the assessee, were allowable in the year in question and the finding was based on appreciation of facts. As regards question No.5, the Tribunal held that it was a finding of fact and did not give rise to any referable question of law.

We have considered the order of the Tribunal and the order passed on the application. We find that the questions as proposed and projected do not arise as questions of law and the conclusions of the Tribunal are based on appreciation of the facts and the decided cases as noted above. No perversity or illegally is demonstrated.

The orders are thus based on appreciation of facts. In CIT v. Ashoka Marketing Ltd. (1976) 103 ITR 543 (SC) and CIT v. Kotrika Venkataswamy & Sons (1971) 79 ITR 499 (SC), it is held that the conclusion based on question of fact does not give rise to any question of law.

In view of the aforesaid position, on the facts and in law, we are satisfied with the correctness of the orders rendered by the Tribunal and hold that the present application filed by the applicant under section 256(2) of the Act is merit less and does not make out any case for a direction to state a case.

In the circumstances, we dismiss this application as devoid of merit but with no order as to costs.

Counsel fee for each side is, however, fixed at Rs.750, if certified.

M.B.A./1400/FC Appeal dismissed.