COMMISSIONER OF INCOME-TAX VS BHANDARI HOSIERY MILLS (P.) LTD.
1999 P T D 1555
[226 I T R 956]
[Punjab and Haryana High Court (India)]
Before G.S. Singhvi and B. Raai, JJ
COMMISSIONER OF INCOME-TAX
Versus
BHANDARI HOSIERY MILLS (P.) LTD.
Income-tax Case No.57 of 1990, decided on 18/11/1996.
(a) Income-tax-,
----Reference---Income---Accounting---Duty draw-back and cash incentive-- Whether Tribunal was justified in deleting additions on account of duty draw-back and cash incentive without giving finding as to method of accounting followed by assessee---Question of law---Indian Income Tax Act, 1961, S.256(2).
(b) Income-tax---
----Reference---Export markets development allowance---Weighted deduction---Commission---Commission paid whether entitled to weighted deduction---Question of law---Indian Income Tax Act, 1961, Ss.35-B & 256(2).
The Assessing Officer found that the total amount towards duty draw-back and cash incentive was Rs.3,60,573 and that a sum of Rs.3,19,827 had not been offered for taxation purposes on the ground that the assessee followed the-cash system of accounting in respect of duty draw back and cash incentive. The Assessing Officer did not accept the plea of the assessee and added Rs.3,19,827 on accrual basis by taking the view that the assessee was maintaining books of account on the mercantile system of accounting. The claim of the assessee for weighted deduction under section 35-B of the Income Tax Act, 1961, on the commission paid to A and F, was also not accepted by the Assessing Officer. The Tribunal deleted the addition and allowed the weighted deduction claimed. On an application to direct reference:--
Held, (i) that the question whether on the facts and in the circumstances of the case, the Tribunal was justified to allow relief to the assessee in respect of addition made on account of duty draw-back and cash incentive amounting to Rs.3,19,827 (for the year 1981-82) and Rs.1,05,610 (for the year 1982-83), without giving a finding as to whether the assessee became entitled to duty draw-back and cash incentive on cash basis or accrual basis was a question of law;
(ii) that the question whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing weighted deduction under section 35-B of the Income Tax Act, 1961, for the two years, i.e. 1981-82 and 1982-83 was a question of law.
CIT v. Oswal Woollen Mills Ltd. (1987) 163 ITR 207 (P&H) ref.
S.S. Mahajan and Ms. Aparana Mahajan for Petitioner.
Nemo for Respondent.
JUDGMENT
G. S. SINGHVI.---These two petitions filed under section 256(2) requiring the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, to refer the questions of law formulated by the petitioner relate to the assessment years 1981-82 and 1982-83.
The assessee is engaged in the manufacturing and export of hosiery goods. During the assessment proceedings for the year 1981-82, a total sum of Rs.3,60,573 was credited out of which Rs.40,746 was credited to the profit and loss account in lieu of duty draw-back and cash incentives. The Assessing Officer found that the total amount towards duty draw-back and cash incentive was Rs.3,60,573 and that a sum of Rs.3,19,827 had not been offered for taxation purposes on the ground that the assessee followed the cash system of accounting in respect of duty draw-back and cash incentive.
The Assessing Officer did not accept the plea of the assessee and added Rs.3,19,827, on accrual basis by taking the view that the assessee was maintaining books of account on mercantile system of accounting. The claim of the assessee for weighted deduction under section 35-B on the commission paid to Ashley and Blake Limited 'and Ferruccie Bueini, Italy, was also not accepted by the Assessing Officer. On that basis, he made the assessment and passed an order, dated August, 17, 1984. A similar order came to be passed for the assessing year 1982-83. The assessee filed appeals against both the orders which were partly allowed by the Commissioner of Income-tax (Appeals). Against the orders of the appellate authority, the Department filed appeals before the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, and the assessee filed cross-objections. All these came to be decided by a common order, dated April 13, 1988. Thereafter, the Department applied for reference of the questions of law formulated by it.
Vide its order, dated February 9, 1990, the Tribunal declined the prayer of the Department.
We have heard Shri S.S. Mahajan, learned counsel for the petitioner, who relied on the order passed by this Court on March 17, 1989, in W.T.C. Nos.23 to 31 of 1984 directing the Income-tax Appellate Tribunal to refer the questions of law to the High Court and argued that the Tribunal had dismissed the appeals filed by the Department on the basis of its earlier order, dated March 26, 1983, passed in W.T.As. Nos.299 to 302 of 1982 and in view of the reference order made by the High Court in the context of the order, dated March 26, 1983, passed by the Tribunal the questions formulated by the petitioner should be ordered to be referred for the opinion of the High Court. Shri Mahajan also relied on CIT v. Oswal Woollen Mills Ltd. (1987) 163 ITR 207 (P&H) in support of his plea that the question relating to the applicability of section 35-B for weighted deduction is a question of law which requires adjudication by this Court.
After having thoughtfully considered the submissions of Shri Mahajan and havingperused the record of the case, we are of the opinion that the following questions of law arise for the opinion of this Court:--
"(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified to allow relief to the assessee in respect of addition made on account of duty draw-back and cash incentive amounting to Rs.3,19,827 (for the year 1981-82) and Rs.1,05,610 (for the year 1982-83)-, without giving a finding as to whether the assessee becomes entitled to duty draw-back and cash incentive on cash basis or accrual basis.
(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in allowing weighted deducted under section 35-B of the Income Tax Act, 1961, for the two years, i.e. 1981-82 and 1982-83?"
Accordingly these petitions are allowed and the Tribunal is directed to refer the abovementioned questions of law to this Court after drawing up a statement of the case and send the same to this Court alongwith the record.
M.B.A./1978/FCOrder accordingly.