Grover Soap Private Ltd. vs Commissioner of Income Tax

G.G. Sohani, Actg. C.J.

The order in this case will also govern the disposal of M. C. C. No. 783 of 1987.

This is an application u/s 256(2) of the Income Tax Act, 1961, hereinafter referred to as "the Act".

While framing the assessment for the assessment year in question, the Income Tax Officer rejected the claim made by the assessee that the expenditure incurred on account of royalty paid to Shri Jaikishan and Jag-dishchander for the use of goodwill of the National Soap Industry was revenue expenditure. On appeal, this finding of the Income Tax Officer was upheld by the Commissioner of Income Tax (Appeals). On further appeal before the Tribunal, the Tribunal also upheld the order passed by the Commissioner of Income Tax (Appeals) in this behalf. Aggrieved by the order passed by the Tribunal, the assessee sought reference but as the application filed by the assessee in that behalf was rejected, the assessee has filed this application u/s 256(2) of the Act.

Having heard learned counsel for parties, we have come to the conclusion that the following question of law does arise out of the order passed by the Tribunal :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the expenditure incurred by the assessee on account of royalty to Jaikishan and Jagdishchander was not allowable in computing the total income of the assessee ?"

The applications are allowed. The Tribunal is directed to state the case and to refer the aforesaid question of law to this court. In the circumstances of the case, parties shall bear their own costs of these applications.