COMMISSIONER OF INCOME-TAI VS PEACOCK CHEMICALS (P.) LTD., 2001 PTD-DELHI-HIGH-COURT-INDIA 3683 (1997)

Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Powers of High Court‑‑‑High Court cannot frame new question‑‑‑Depreciation allowed on finding that assets belonged to assessee but were leased out‑‑‑High Court could not reframe question and consider whether lessee actually used assets‑‑‑Indian Income Tax Act, 1961, Ss.32 & 256.

There are two restrictions on the High Court exercising jurisdiction under section 256(2) of the Income Tax Act, 1961. The High Court cannot disturb the finding of fact recorded by the Tribunal and based on the material available before it. The High Court can reframe a question so as to bring out the real question of law arising from the order of the Tribunal but it cannot frame a new question or reframe a question in such a way as would amount to raising a new question which was not raised before the Tribunal:

Held, dismissing the application to direct reference, (i) that it was not disputed that the business of the assessee in the relevant assessment year had been the leasing out of its assets including trucks, cylinders, photo- composing and type setting machines. The finding of fact recorded by the Tribunal was that during the assessment year, the assessee was the owner of the assets and they were leased out. The tact that the assets were not actually used or were not capable of being put to use by the lessee might have been relevant for the purpose of finding out whether the transaction was colourable or not but it had no relevance so far as the finding of the assets having been used by the lessor (assessee) for the purpose of the business of leasing was concerned. The question whether depreciation could be allowed despite non‑user of assets for business purposes, did not arise from the order of the Tribunal. It could not be referred to the High Court.

(ii) That the second question related to gas cylinders. They were owned by the lessee but the ownership was transferred to the assessee during the assessment year and the lease had also taken place during the assessment year as found by the Tribunal. The question whether the Tribunal was correct in holding that delivery of movable property includes the user of the asset by the purchaser did not arise from the order of the Tribunal and could not be referred to the High Court.

CIT v. Kotrika Venkataswamy & Sons (1971) 79 ITR 499 (SC); CIT v. Scindia Steam Navigation Co. Ltd. _(1961) 42 ITR 589 (SC) and Lakshmiratan Cotton Mills Co. Ltd. v. CIT (1969) 73 ITR 634 (SC) ref.

R.D. Jolly and Ms. Prem Lata Bansal for the Commissioner.

C.S. Aggarwal, Salil Aggarwal and Partap Srivastava for the Assessee.

JUDGMENT

Heard.

This is an application under section 256(2) of the Income Tax Act, 1961, filed by the Revenue seeking mandamus to the Income‑tax Appellate Tribunal for drawing up a statement of case and referring the following two questions as questions of law arising from the order of the Tribunal for the opinion of the High Court:‑‑

"(1) Whether, on the facts and in the circumstances of the case; the Income‑tax Appellate Tribunal is correct in allowing the depreciation on truck, gas cylinders and photo composing and type setting machines despite the fact of non‑user of the said assets for business purposes during the year under consideration?

(2) Whether, on the facts and in the circumstances of the case, the Income‑tax Appellate Tribunal is correct its holding that delivery of movable property includes the user of the asset by the purchaser?"

Having heard learned counsel for the parties we are of the opinion that the petition must fail It is not disputed that the business of the assessee in the relevant assessment year has been the leasing out of its assets including trucks, cylinders, photo‑composing and type setting machines. The finding of fart recorded by the Tribunal is that during the assessment year the assessee was the owner of the assets and they were leased out. Learned counsel for the petitioner‑Department has carried the Court through various documents in support of his submission that the transactions entered into by the assessee were colourable ones and in fact there was no leasing out though it was made to appear that assets were leased out.

Unfortunately, the questions which were suggested to be framed on behalf of the Department before the Tribunal do not bear out the contention which is being advanced before this Court. Question No. l as framed goes to reflect the contention of the Department that if the assets forming the subject‑matter of the lease were not actually used and were not capable of being used by the lessee for the purpose for which they were intended, would the applicability of section 32 be attracted. Section 32 speaks of the assets being used by the assessee for the purpose of business or profession. The fact that the assets were not actually used or were not capable of being put to use by the lessee night have been relevant for the purpose of finding out whether the transaction was colourable or not but it has no relevance so far as the finding of the assets having been used by the lessor (assessee) for the purpose of the business of leasing is concerned in the backdrop of the finding recorded by the Tribunal that there was such a leasing.

So, is the case with Question No.2. As pointed out at the Bar, question No.2 relates to gas cylinders. They were owned by the lessee but the ownership was transferred to the assessee during the assessment year and the lease had also taken place during the assessment year as found by the Tribunal. It appears that the possession of the gas cylinders was not physically transferred from the lessee to the lessor‑assessee simultaneously with the sale and then back to the lessee from the lessor‑assessee simultaneously with the lease.

We are, therefore, of the opinion that the question which really could have arisen and as such has been sought to be projected by the submissions made by counsel for the Revenue was not proposed by it before the Tribunal. Learned counsel for the Revenue has submitted that this Court does have jurisdiction to reframe any suggested question so as to appropriately word it and bring it in conformity with the one really arising from the order of the Tribunal. There can be no dispute about such jurisdiction vesting in this court but a distinction has to be drawn between reframing of a question and framing of a new question. In our opinion, the question which could have arisen and which is sought to be suggested by the Department during the course of submissions made before this Courts was never proposed before the Tribunal. While hearing a petition under subsection (2) of section 256 of the Income‑tax Act; this Court cannot entertain a prayer for framing a question which was not suggested or sought to be referred to the Tribunal in the petition under subsection (1) of section 256. There is ample authority for two limitations on the High Court exercising jurisdiction under section 256(2) of the Act. The High Court cannot disturb the finding of fact recorded by the Tribunal and based on the material available before it. The High Court can reframe a question so as to bring out the real question of law arising from the order of the Tribunal but it cannot frame a new question or reframe a question in such a way as would amount to raising a new question which was not raised before the Tribunal and the Tribunal had no occasion to apply its mind to the suggested question whether it arises for reference or not ‑‑‑ CIT v. Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589 (SC); CIT v. Kotrika Venkataswamy & Sons (1971) 79 ITR 499 (SC) and Lakshmiratan Cotton Mills Co. Ltd. v. CIT (1969) 73 ITR 634 (SC).

For the foregoing reasons we are of the opinion that the questions on which reference has been sought for do not arise as questions of law from the facts and circumstances found by the Tribunal. We may reiterate that the correctness of the facts and circumstances found by the Tribunal are not the subject‑matter of challenge on the phraseology of the two questions as suggested. We do not find any infirmity in the order of the Tribunal refusing to make a statement of case to this Court and rejecting the application under section 256(1) of the Act.

The petition is, therefore, rejected though without any order as to costs.

M.B.A./587/FC

Petition dismissed.