COMMISSIONER OF INCOME-TAX VS AYURVED SEWA ASHRAM LTD
1999 P T D 933
[225 I T R 778]
[Rajasthan High Court (India)]
Before B. R. Arora and J. C. Verma, JJ
COMMISSIONER OF INCOME-TAX
Versus
AYURVED SEWA ASHRAM LTD
D.B. Income-tax Reference Application No.25 of 1996, decided on 17/07/1996.
Income-tax--
----Reference---Question of fact---Business expenditure---Expenditure on presentation of gifts of watches to dealers who attended "sales conference" Expenditure incurred on repairs and maintenance of car ---I.T.O. disallowing claim of deduction of expenditure---Tribunal deleting disallowance made by I.T.O. on ground that watches not given for advertisement but distributed among dealers for maintaining good relations---Whether a gift item carries advertisement value is a finding of fact---Tribunal also refusing to refer question as tax effect less than Rs.30,000 as per circular of C.B.D.T.---No referable question of law arises---Indian Income Tax Act, 1961, Ss.37(3-A) & 256(2)---Indian Income Tax Rules, 1962, R.6-B(3).
The assessee claimed deduction of expenditure amounting to Rs.1,48,388 under the head "Sales conference" which included expenditure of Rs.37,820 relating to presentation of watches costing more than Rs.50 each to the dealers who attended the conference. The assessee also claimed an amount of Rs.6,451 being 20 per cent. of the total expenditure of Rs.32,256 spent on the repairs and maintenance of the car. The Income-tax Officer disallowed the amount of Rs.37,820 spent on the presentation of the gifts under Rule 6-B(3) of the Income-tax Rules, 1962, as well as the amount of Rs.6,451 under section 37(3-A) of the Income Tax Act, 1961. The Commissioner (Appeals) dismissed the appeal filed by the assessee. The Tribunal held that since the watches were not proved to have been given for the purpose of advertisement but had been distributed among the existing dealers and stockists for maintaining good relations, the expenditure on them could not be disallowed under Rule 6-B(3) of the Income Tax Rules. The Tribunal also deleted the addition of Rs.6,451 in respect of the amount spent on the repairs and maintenance of the car. The Tribunal rejected the application of the Revenue under section 256(1) of the Act to refer questions of law on the ground that its finding was a finding of fact as also on the ground that the tax effect in the case was less than Rs.30,000 and, therefore, under the circular issued by the Central Board of Direct Taxes the question should not be referred. On an application under section 256(2):
Held, affirming the decision of the Tribunalthat no questions of law arose for reference.
Sandeep Bhandawat for Appellant.
JUDGMENT
B.R. ARORA, J.---The Revenue, by this application under section 256(2) of the Income Tax Act, 1961, has prayed that the Tribunal may be directed to state the case and refer the following questions of law for the opinion of the High Court:
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is legally justified in deleting the disallowance of Rs.37,820 made under Rule 6-B(3) of the Income tax Rules?
(2) Whether the Income-tax Appellate Tribunal is justified in deleting the disallowance made under section 37(3-A) of the Income Tax Act, 1961?"
The assessee, Ayurved Sewashram Ltd., Udaipur, is a private limited firm. For the assessment year 1985-86, the assessee claimed an expenditure of Rs.1,48,388 under the head "Sales conference". This amount of Rs.i,48,388 includes the expenditure of Rs.37,820 which relates to the presentation of the watches costing more than Rs.50 each, to the dealers who attended the conference. The assessee also claimed an amount of Rs.6,451 being 20 per cent of the total expenditure of Rs.32,256 spent on the repairs and maintenance of the car. The Income-tax Officer, "A" Ward, Udaipur, disallowed the amount of Rs.37,820 spent on the presentation of the gifts under Rule 6-B(3) of the Income-tax Rules as well as the amount of Rs.6,451 under section 37(3-A) of the Income-tax Act.
Aggrieved by the order passed by the Income-tax Officer disallowing the deductions and making addition in the income of the assessee, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Jodhpur (Camp Udaipur). The Commissioner of Income-tax (Appeals), Jodhpur, by his order, dated January 15, 1990. dismissed the appeal filed by the assessee. Aggrieved by the order passed by the Commissioner of Income-tax (Appeals), Jodhpur, the assessee preferred an appeal before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, and the Tribunal, by its order, dated October 24, 1994, allowed the appeal filed by the assessee and deleted the addition made by the Income-tax Officer as affirmed by the Commissioner of Income-tax (Appeals), Jodhpur, and directed that both the disallowances should be deleted.
Aggrieved by the order, dated October 24, 1994, passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, the Revenue preferred an application under section 25(1) of the Act before the Tribunal and the Tribunal, by its order, dated May 23, 1995, dismissed the application filed by the Revenue under section 256(1) on the ground that no referable question(s) of law were involved in the matter and even otherwise the tax effect is less than Rs.30,000 and, therefore, as per the circular of the Board, dated July 12, 1984, the question should not be referred. Aggrieved by the order, dated May 23, 1995, passed by the Tribunal refusing to refer the questions of law for the opinion of this Court, the Revenue has presented the present application under section 256(2) of the Act for directing the Tribunal to state the case and refer the questions of law mentioned in the application.
Question No. 1:
The first question relates to the deletion of the disallowance of Rs.37,820 made under Rule 6-B(3) of the Income-tax Rules towards the cost of the watches. The Tribunal, while deciding this issue, relied upon the decisions of the Bombay as well as the Gujarat High Courts. The Tribunal also held that since the watches are not proved to have been given for the purpose of advertisement but have been distributed amongst the existing dealers and stockists for maintaining good relations. the expenditure on it cannot have been disallowed under Rule 6-B(3) of the Rules. The finding arrived at by the Tribunal on this point is purely a finding of fact. Whether the gift item carries advertisement value or not, is necessarily a finding of fact. No question of interference, therefore, arises. The Tribunal was, therefore, justified in refusing to refer this question for the opinion of this Court because no referable question of law arises in this regard.
Question No.2:
The second question is regarding deleting the disallowance made by ,the Tribunal under section 37(3-A) of the Act. The amount which was added by the assessing authority and affirmed by the Commissioner of Income-tax (Appeals), Jodhpur, was Rs.6,451 (20 per cent. of the total expenditure of Rs.33,256) spent on the repairs and maintenance of the car. The Tribunal deleted this amount on the basis of its earlier judgment given in the case of the assessee itself for the assessment year 1984-85. The Revenue, against that order passed by the Tribunal, after refusal of the Tribunal to refer the question of law for the opinion of this Court, filed an application under section 256(2) of the Act before the High Court and the High Court rejected the application filed by the Revenue under section 256(2) and refused to direct the Tribunal to state the case and refer the question for the opinion of the High Court. The Tribunal was, therefore, right in refusing to refer this question also for the, opinion of this Court. The finding arrived at by the Tribunal is purely a finding of fact and no referable question of law arises in the case. In this view of the matter, the Tribunal was right in refusing to refer this question also for the opinion of this Court.
The Tribunal also refused to refer these questions on the ground that the tax effect in the case is less than Rs.30,000 and, therefore, an per the circular of the Board, the question should not be referred. The refusal by the Tribunal on this ground also cannot be said to be illegal or erroneous.
In this view of the matter, we are of the opinion that no referable question of law arises in the matter and the Tribunal was justified in rejecting the application filed by the Revenue under section 256(1) of the Income-tax Act.
In the result, we do not find any merit in this application under section 256(2) of the Income-tax Act and the same is hereby dismissed.
C.M.A./1766/FC Application dismissed.