COMMISSIONER OF INCOME TAX vs AYURVED SEWA ASHRAM LTD.

B. R. ARORA, J. :

The Revenue, by this application under s. 256(2) of the IT Act, 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 :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is legally justified in deleting the disallowance of Rs. 37,820 made under r. 6B(3) of the IT Rules ?

(2) Whether the Tribunal is justified in deleting the disallowance made under s. 37(3A) of the IT Act, 1961 ?"

The assessee M/s Ayurved Sewashram Ltd., Udaipur is a private limited firm. For the asst. yr. 1985-86, the assessee claimed an expenditure of Rs. 1,48,388 under the head "Sales Conference". This amount of Rs. 1,48,388 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 the 20 per cent of the total expenditure of Rs. 32,256 spent on the repairs and maintenance of the car. The ITO, A Ward, Udaipur, disallowed the amount of Rs. 37,820 spent on the presentation of the gifts under r. 6B(3) of the IT Rules as well as the amount of Rs. 6,451 under s. 37(3A) of the IT Act.

Aggrieved with the order passed by the ITO disallowing the deductions and making addition in the income of the assessee, the assessee preferred an appeal before the CIT(A), Jodhpur (Camp Udaipur). The CIT(A), Jodhpur, by his order dt. 15th Jan., 1990, dismissed the appeal filed by the assessee. Aggrieved with the order passed by the CIT(A), Jodhpur, the assessee preferred an appeal before the Tribunal, Jaipur Bench, Jaipur and the Tribunal, by its order dt. 24th Oct., 1994 allowed the appeal filed by the assessee and deleted the addition made by the ITO as affirmed by the CIT(A), Jodhpur and directed that both the disallowances should be deleted.

Aggrieved with the order dt. 24th Oct., 1994 passed by the Tribunal, Jaipur Bench, Jaipur, the Revenue preferred an application under s. 256(1) of the Act before the Tribunal and the Tribunal, by its order dt. 23rd May, 1995, dismissed the application filed by the Revenue under s. 256(1) on the ground that no referable question(s) of law (is) 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 dt. 12th July, 1984, the question should not be referred. Aggrieved with the order dt. 23rd May, 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 s. 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 r. 6B(3) of the IT Rules towards the cost of the watches. The Tribunal, while deciding this issue, relied upon the decisions of the Bombay as well as 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 r. 6B(3) of the Rules. The finding arrived at by the Tribunal on this point is purely 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 s. 37(3A) of the Act. The amount which was added by the assessing authority and affirmed by the CIT(A), 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 asst. yr. 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 s. 256(2) of the Act before the High Court and the High Court rejected the application filed by the Revenue under s. 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, as 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 s. 256(1) of the IT Act.

In the result, we do not find any merit in this application under s. 256(2) of the IT Act and the same is hereby dismissed.