Assam Company Ltd. vs Commissioner of Income Tax

V.D. Gyani, J.—Both these petitions u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), have raised common questions of law as noted, they were heard together and are being disposed of by a common order.

Civil Rule No. 14(M) of 1992 is directed against the order dated December 5, 1991, passed by the Tribunal rejecting Reference Application No. 104/(Gau) of 1991 arising out of Miscellaneous Petition No. 25 of 1990, I. T. A. No. 156 of 1988 pertaining to the assessment year 1983-84, rejecting the petitioner''s application u/s 256(1) of the Act, refusing to refer the questions of law to this court.

Civil Rule No. 1G(M) of 19''92 arises out of the order dated December 5, 1991, passed by the Tribunal on Reference Application No. 50 of 1990, arising out of I. T. A. No. 156 of 1988 for the assessment year 1983-84 rejecting the petitioner''s reference application u/s 256(1) of the Act and refusing to refer the questions of law to this court.

The petitioner is a limited company, duly registered under the Companies Act, 1956. The dispute relates to the assessment year 1983-84. The assessment order dated March 31, 1986, is filed as annexure-1. The petitioner preferred an appeal before the Commissioner of Income Tax (Appeals). The appeal was disposed of by order dated February 18, 1988, vide annexure-2. The petitioner, therefore, filed an appeal before the Tribunal which was disposed of by its order dated April 24, 1990, vide annexure-3. Being aggrieved by the said order, the petitioner filed a reference application u/s 256(1) of the Act praying for drawing up a statement of the case and referring as many as 14 questions of law for this court''s opinion, These questions are set forth in paragraph 4 in Civil Rule No. 16(M) of 1992 and also in annexure-5 to the reference application, while the rejection order dated December 5, 1991, is annexure-6.

So far as it relates to C. R. No. 14(M) of 1992, there is an added feature, namely, that the assessee had moved an application praying for rectification of certain mistakes in the Tribunal''s order dated April 24, 1990. This application was rejected by the Tribunal, vide order dated October 8, 1990. The petitioner filed yet another miscellaneous application registered as 34 of 1990 contending, inter alia, that the Tribunal erred in rejecting the first application without affording any opportunity of hearing to the petitioner along with this application. The petitioner also filed a reference application registered as Application No. 90 of 1990. The Tribunal allowed Application No. 34 of 1990 by its order dated January 29, 1991, recalling its earlier order dated October 8, 1990, and rejected Reference Application No. 90 of 1990 arising out of the rejection order as having become infructuous. Miscellaneous Application No. 25 of 1990 was heard afresh, after giving full opportunity of hearing to the petitioner, but ultimately it was dismissed by order dated May 7, 1991, as per annexure-10 in Civil Rule No. 14(M) of 1992. Aggrieved by this order, the petitioner filed Reference Application No. 104 of 1991 seeking reference of the following questions of law :

"(1) Whether the findings of the Tribunal that it had considered all the facts and circumstances of the case and the materials on record while passing its order dated April 24, 1990, and that there was no mistake apparent from the records, are perverse ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in rejecting Miscellaneous Petition No. 25/(Gau) of 1990 filed by the assessee on June 22, 1990 ?"

The Tribunal rejected the application holding that no referable questions of law arose by its order dated December 5, 1991, filed as annexure-12.

Learned counsel appearing for the petitioner strenuously urged that the questions, as proposed, do arise out of the Tribunal''s order dated May 7, 1991, and the Tribunal was not justified in refusing to refer the questions for this court''s opinion. Learned counsel for the petitioner raised the following points--(1) The disallowance of Rs. 20,000 out of Rs. 70,000 paid by the assessee to the solicitor on account of consultancy fees and incidental charges and its sustenance by the Tribunal with a marginal variation of the amount from Rs. 20,000 to Rs. 50,000 was wholly unjustified. (2) Whether the Tribunal was right in setting aside for fresh adjudication the admissibility of payment of Rs. 1,11,168 paid to A. Furniture and Co. instead of deciding the same on the basis of admitted facts and further holding that the above expenditure was expenditure capital in nature, (3) The expenditure of Rs. 16,845 incurred by the assessee in obtaining certified copies of the Calcutta High Court''s order was an expenditure capital in nature. The disallowance of Rs. 4,21,388 out of the bonus payment of Rs. 73,49,551 whether this disallowance of Rs. 4,00,000 out of the assessee''s claim of Rs. 6,72,864 for labour welfare was justified to the extent of Rs. 3,50,000. (4) Whether the Tribunal was right in setting aside a deduction of Rs. 12,919 for borrowing bamboo thatch. (5) Whether the disallowance of Rs. 17,010 u/s 80VV of the Act and a further opportunity to the petitioner for adducing evidence to substantiate his claim, and, lastly, (6) the additional ground raised for the first time relating to the assessee''s sales tax liability for the assessment year in question, was in order.

Learned counsel appearing for the petitioner denounced the Tribunal''s finding on most of the points as perverse, either in disregard of facts available on the record or not borne out by facts. A perversity of finding, is rather easy to allege but hard to substantiate. A finding cannot be said to be perverse if it is against the weight of the evidence, it is perverse only if it is altogether against evidence (see Parry''s (Calcutta) Parry''s (Calcutta) Employee''s Union Vs. Parry and Co. Ltd. and Others, Stroud''s Judicial Dictionary defines "perverse finding", thus : a perverse verdict may probably be defined as one that is not only against the weight of evidence but is altogether against the evidence. Going through the Tribunal''s order and the bill of the solicitor as placed on record, it cannot be said that the disallowance to the extent of Rs. 15,000 out of the assessee''s claim of Rs. 70,000 paid to the solicitor is wholly without any material.

So far as the payment of Rs. 1,11,168 to A. Furniture and Co. is concerned, the Tribunal has not come to any conclusion of fact or of law as the matter was set aside for fresh adjudication after bringing out the correct basic facts on the record as the Tribunal found that the facts available were not sufficient for final adjudication of the claim. So far as the expense of Rs. 16,845 incurred by the assessee for obtaining certified copies of the order passed by the Calcutta High Court was concerned this amount was paid to Khaitan and Co., and according to the Assessing Officer, it was related to Indianisation of Sterling Tea Co. which was capital in nature, the Commissioner of Income Tax (Appeals) has sustained this finding.

The argument advanced before the Tribunal was in fact that the claim should have been allowed as deduction at ten per cent. u/s 35D even if the authorities found it to be disallowable. The question of applicability of Section 35D was not dealt with by the authorities below.

Really speaking, the Commissioner of Income Tax (Appeals) had given a direction to the Assessing Officer to allow ten per cent. deduction and the Tribunal found that no further modification on this count was called for. On the question of bonus payment of Rs. 73,49,551, learned counsel questioned the finding of the Tribunal that it called for fresh adjudication. He insisted that the Tribunal ought to have decided the question of law involved in the issue and submitted that the disallowance of Rs. 4,21,388 was wholly unjustified.

No question of law can be decided in the vacuum of facts, courts or Tribunals do not entertain questions of law as pure academics. In this connection, it would be pertinent to note that the authorities below had noted that the assessee brought forward bonus set on before ascertaining the net allocable surplus to Rs. 71,47,787, while the amount set on earlier years was Rs. 2,18,924, as such, the deduction as claimed on this count was not allowed. It was further found that an amount of Rs. 1,99,551 was not covered by the Payment of Bonus Act and cannot be allowed as deduction. Referring to Section 31A of the Payment of Bonus Act and the finding that there was an agreement between the assessee and the employees in respect of certain disputes and a settlement was arrived at on September 15, 1981, under which the assessee had to pay the bonus at the rate of 20 per cent. to the employees and this settlement was approved by the State Government, the Tribunal was wrong in disallowing the deduction as claimed by the assessee, more so, when the amount had already been paid to the workers and the employees of the assessee. Reading Sections 28 and 36(1)(ii) together, the Tribunal dealing with the assessee''s claim found that it was necessary to ascertain the number of workers who were eligible for such payments as according to the authorities below, the amount paid by the assessee to the extent admissible, had already been allowed. Thus, this extra liability of the assessee would have to be ascertained. In this view of the matter, the insistence of learned counsel that the Tribunal should have decided the legal question relating to the payment of bonus, is ill-conceived. Remanding the matter to the Assessing Officer for verification of the facts and material and to bring details on records for fresh disposal of the claim was in the circumstances not only the proper course open to the Tribunal but the only course. In this connection Empire Plantations (India) Ltd. Vs. Commissioner of Income Tax, can be referred to. The next point relating to the disallowance of Rs. 4,00,000 out of the labour welfare expenses, the Tribunal further restricted it to Rs. 3,50,000. It is the assessee who claims an opportunity to furnish particulars and adduce further evidence on the point. The Tribunal has considered this aspect and noted that the Assessing Officer had disallowed the entire claim. If the assessee desired furnishing any more material in support of his claim and other material whatever he wanted to place before the Commissioner of Income Tax (Appeals), he could have done so. The other point relating to bamboo thatch, the Tribunal for good and valid reasons has remanded the case to the Assessing Officer for fresh disposal after considering the material to be placed by the assessee. As for surcharge, both the authorities, the Income Tax Officer and the Commissioner of Income Tax (Appeals) found that there was no bifurcation of the expenditure, hence it was disallowed. The Assessing Officer further disallowed the claim and deduction u/s 80W of the Act. In the circumstances, the Tribunal did not find any justification for interfering with the order passed by the Commissioner of Income Tax (Appeals). It is not open to the High Court to interfere with the finding of facts recorded by the Tribunal and reassess material so as to arrive at a conclusion different from that of the Tribunal. In the instant case, the Tribunal has remanded most of the points raised by the assessee for fresh enquiry and rightly so, as it found lack of material. In Patnaik and Co. Ltd. Vs. Commissioner of Income Tax, Orissa, the Supreme Court held that the Appellate Tribunal is the final fact-finding authority under the Act and the High Court has no jurisdiction to go behind the statements of fact made by the Tribunal in its appellate order. The High Court may do so only if there is no evidence to support them or the Appellate Tribunal has misdirected itself in law in arriving at the findings of fact. But even there, the High Court cannot disturb the findings of fact given by the Appellate Tribunal unless a challenge is directed specifically by a question framed in a reference against the validity of the impugned findings of fact on the ground that there is no evidence to support them or they are the result of a misdirection in law. (emphasis laid).

Going through the impugned order it cannot be said that the finding arrived at by the Tribunal is not supportable by evidence or material available on the record or that the Tribunal misdirected itself on the question of law. As already noted, on most of the points their primary facts were lacking, thus the Tribunal has remanded the matter and it is essentially a question of fact. Therefore, in view of the foregoing discussion, this court would not be justified in calling for a statement of the case on such question. Consequently, Civil Rule No. 16(M) of 1992 is liable to be dismissed. It is accordingly dismissed.

The other connected civil rule, i.e., Civil Rule No. 14(M) of 1992, is against the rectification order. A rectification is permissible for errors apparent on the face of the record and this error apparent is "distinguished from a mere erroneous decision" (see Thungabhadra Industries Ltd. Vs. The Government of Andhra Pradesh, and in dealing with a rectification application, a court or the Tribunal is not expected to reopen matters finally decided. The Tribunal, on consideration of the points raised in the appellate order and the findings of facts, came to the conclusion that there was no mistake apparent from the record. In the circumstance, the impugned order cannot be faulted on any legitimate ground. Consequently, Civil Rule No. 14(M) of 1992 is also dismissed.