COMMISSIONER OF INCOME TAX vs RAM BAHADUR THAKUR LTD.

V. V. KAMAT, J.:

The Revenue, under s. 256(2) of the IT Act, 1961 wants our direction to the Tribunal for reference of six questions. They are as follows:

" 1. Whether, on the facts and in the circumstances of the case, the order of the Tribunal under s. 254(2) of the IT Act is valid and with jurisdiction?

Whether, on the facts and in the circumstances of the case :

(i) is not the order of the Tribunal finding that "the tenancy arrangement was a genuine one" as against the earlier finding of tenancy "on a hypothetical basis" one amounting to review and hence against law?

(ii) Is not the order against the decision in Commissioner of Income Tax Vs. Gokul Chand Agarwal, and Commissioner of Income Tax Vs. Ramesh Electric and Trading Co., .

Whether, on the facts and in the circumstances of the case, the Tribunal which fixed the quantum at Rs. 15,00,000 and "in fixing this quantum has proceeded on a hypothetical basis that there existed a tenancy between two parties.... "in its earlier order is right in law and fact and on materials and is with jurisdiction in finding ..

11 we hold that the tenancy arrangement was a genuine one and the payment of Rs. 30 lakhs was incurred wholly and exclusively in connection with the sale of impugned property" and are not the above findings, such as, "a genuine one", ''the payment of Rs. 30 lakhs, ''was incurred wholly and exclusively in connection with the sale'' wrong, unreasonable, inconsistent, without materials and based on surmises and conjunctures?

Whether, on the facts and in the circumstances of the case, the Tribunal which on the basis of the materials and evidence available at the time of its first order dt. 29th Dec., 1992 could find the existence of tenancy between parties only ''on a hypothetical basis'' could on the basis of the very same material, and evidence find ''the tenancy agreement'' ''a genuine one'' and are not the inconsistent finding based on the same material/no material, militating against each other, illogical, unreasonable and hence both the orders vitiated and void?

Whether, on the facts and in the circumstances of the case, the Tribunal while recalling its earlier order is right in law and fact in relying on the contents of the Reference Application filed as against the order recalled?

Whether, on the facts and in the circumstances of the case,-

(i) the Tribunal is right in law and fact in holding that the reasonableness of the amount paid was not an issue in itself before the Tribunal?

(ii) could not the Tribunal which found tenancy on a hypothetical basis determine the quantum on a reasonable basis?"

The assessment year is 1985-86 and in regard thereto the original assessment was completed on 24th Feb., 1988 under s. 263 (sic) of the IT Act, 1961. The CIT by order dt. 21st Feb,, 1990 directed reassessment. The present proceedings relate to an item relating to the sale of the premises of the assessee in Maker Towers in Bombay. With reference to the amount of capital gain of Rs. 793,970 out of which the assessee claimed deduction of Rs. 30 lakhs as the amount paid for getting vacant possession of the property from one concern in the name and style of Messrs. Thakur Shipping Company given on lease for a period of 11 months in May, 1982. This deduction was rejected by the ITO and rejection was confirmed by the first appellate authority CIT(A) treating it as a colourable device. The Tribunal in second appeal therefrom in the first instance held that this is a situation of tenancy on hypothetical basis and presumed thereupon that the assessee landlord had to pay a reasonable amount to the tenant. It held that a sum of Rs. 15 lakhs and not Rs. 30 lakhs as claimed should be allowed as a deduction.

The Revenue applied for reference from the said order of the Tribunal (Annexure C) dt. 23rd Dec., 1992. These references, bearing IT Ref. Nos. 79 & 80/94 are pending hearing and final decision in this Court.

It appears that during the pendency of these proceedings in this Court, a Misc. Petn. came to be filed before the Tribunal and by the impugned order (Annexure D) dt. 6th Aug., 1993 ordered correction upholding the main grievances of the assessee with regard to the situation of tenancy under the agreement to the effect that the whole expenditure of Rs. 30 lakhs would have to be allowed with regard to the claim for deduction in regard thereto.

The Revenue also preferred application for reference before the Tribunal. The application is rejected on the simple ground of there being pending references (IT Ref. Nos. 79 & 80 of 1994) which would do complete and enough justice to the parties and in the event of this Court answering the questions in favour of the Revenue, automatically the order passed by the Tribunal on the Misc. Petri. would be infructuous and, therefore, referring the question would be academic.

Having considered the situation, hearing the learned senior standing counsel for taxes and the learned counsel for the assessee, it is necessary that questions 1 to 4 need direction for reference. We find that questions 5 and 6 are only aspects,of questions 1 and 2 and need not be called upon to be referred specifically and independently.

For the above reasons the Tribunal, Cochin Bench, Koehi, is directed to refer the four questions after drawing up a detailed statement of case as expeditiously as possible because already two references-IT Ref. Nos. 79 & 80 of 1994 are pending in this Court.

The Tribunal is directed further to remit the reference to this Court on or before 3rd Sept., 1996. Prayers in the petition are partially granted as above.

OPEN