Commissioner of Income Tax vs J.K. Synthetics Ltd. (No. 2)

B.N. Kirpal, J.—The petitioner had sought reference of 14 questions to this court. These questions are as follows :

(i) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that the expenditure of Rs. 1,04,710 incurred on the foreign tour to Kenya is revenue expenditure and not capital expenditure ?

(ii) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that the expenditure of Rs. 73,730 incurred on the visit of Shri S. L. Singhania and Shri S. S. Mishra is revenue expenditure and not capital expenditure ?

(iii) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that the expenditure of Rs. 39,625 incurred by Shri S. R. Singhania and Shri. B. N. V. Iyengar on foreign tours in connection with manufacturing programmes of various machines is revenue expenditure and not capital expenditure ?

(iv) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that the expenditure of Rs. 37,064 incurred on traveling by the wives of the employees and two other employees is expenditure for the purpose of business of the assessed and is an allowable expenditure ?

(v) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that payment of know-how fees paid to Messrs. Tecnimont, S. P. A. Italy amounting to Rs. 30,57,499 and to Messrs. I. W. K. A. (West Germany) amounting to Rs. 3,48,033 was not of such nature as to bring in an enduring advantage and rather the payment could be regarded as for the extension of the existing acrylic business and thereby holding that the said expenditure is revenue in nature and not capital, especially when the assessed himself has admitted in the assessment year 1979-80 that the Income Tax Appellate Tribunal''s finding that acrylic business was already in existence stands controverter by the assessed''s own admission ?

(vi) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that the payment of Rs. 10 lakhs to the All India Congress Committee was expenditure on advertisement and is thus allowable as deduction, specially when the assessed did not produce any evidence before the Income Tax Officer that the said expenditure was incurred for advertisement purposes only and no nexus was established of this expenditure with the business of the assessed ?

(vii) Whether the Income Tax Appellate Tribunal was correct in law and on facts in confirming the order of the Commissioner of Income Tax (Appeals) in allowing 50% of depreciation on the machinery installed in the premises of J. K. C. M. and P. P. L. ?

(viii) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that excise duty liability of Rs. 12,72,672 continued to exist and is thus allowable as deduction especially when with the decision of the Rajasthan High Court dated 14th May, 1976, the liability ceased to exist in law ?

(ix) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that the cash allowance paid by the assessed-company to its employees are not to be treated as perquisites but only a part of salary, specially in view of the decision of the Delhi High Court in J. Dalmia Vs. Commissioner of Income Tax, Delhi (Central), ?

(x) Whether the Income Tax Appellate Tribunal was correct in law and on facts in allowing development rebate on plant and machinery installed in the F. E. M. Unit at 25% instead of 15% allowed by the Income Tax Officer especially when the assessed''s case does not fall u/s 33(1)(B)(i) read with Schedule 5 to the Income Tax Act ?

(xi) Whether the Income Tax Appellate Tribunal was correct in law and on facts in directing the Income Tax Officer to allow depreciation on S. S. P. and Tyre Chord Units at 15% as against 10% allowed by the Income Tax Officer ?

(xii) Whether the Income Tax Appellate Tribunal was correct in law and on facts in directing the Income Tax Officer to compute the deficiency u/s 80J for the assessment years 1973-74 and 1974-75 which is to be brought forward and set off u/s 80J(3) of the Income Tax Act, even though the Supreme Court has stayed the assessment proceedings for the assessment years 1973-74 and 1974-75 and the entitlement of the assessed for relief u/s 80J is still to be adjudicated upon ?

(xiii) Whether the Income Tax Appellate was correct in law and on facts in holding that the assessed is entitled to relief u/s 80J on the F. E. M. and cement divisions by treating these divisions as separate industrial undertakings, especially when the assessed''s case was that the reconstruction of business already in existence ?

(xiv) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that the amount of Rs. 1,80,000 received by the assessed-company for security deposit for cops is not an integral part of the transaction of the sale of yarn and is thus not income of the assessed ?"

The Income Tax Appellate Tribunal, u/s 256(1) of the Act, has already referred questions Nos. 5, 6 and 8.

In our opinion, out of the remaining questions, questions Nos. 1, 7, 9, 10, 12 and 13 are not questions reference of which can be called for. The reasons for the same as follows :

With regard to question No. 1 the finding of fact of the Tribunal is that setting up of the company was the business of the assessed and this being so, incurring expenses on such foreign tour in connection with the business activity can (sic) be regarded as revenue expenditure and the Tribunal was, Therefore, right in not referring this question.

Question No. 7 is similar to the question which had been raised in an earlier petition which was disposed of by our decision reported as Commissioner of Income Tax Vs. J.K. Synthetics Ltd. (No. 1), ; Commissioner of Income Tax Vs. J.K. Synthetics Ltd. (No. 2), and Commissioner of Income Tax Vs. J.K. Synthetics Ltd. (No. 1), , wherein we had declined to call for the reference of the same.

As regards question No. 9, a similar question was sought to be raised in a case and, vide our decision reported as Commissioner of Income Tax Vs. Jay Engineering Works Ltd., , it has been held that cash allowance has to be treated as part of the salary and, Therefore, no reference is called for.

Question No. 10 is covered by the decision in J.K. Synthetics Ltd. Vs. Commissioner of Income Tax, Kanpur, and is, Therefore, academic.

As regards question No. 12, a similar question was sought to be raised in I. T. C. No. 136 of 1985 but, by our decision reported as Commissioner of Income Tax Vs. J.K. Synthetics Ltd. (No. 1), , the prayer of the Revenue was rejected and reference was not called for.

As regards question No. 13, the Income Tax Officer himself has granted this relief in respect of the assessment year 1975-76 and, Therefore, the Tribunal was right in not referring this question.

After hearing learned counsel for the parties, we now direct the Tribunal to state the case and refer the aforesaid questions Nos. 2, 3, 4, 11 and 14 to this court.

There will be no order as to costs.