J.K. Synthetics Ltd. vs Commissioner of Income Tax

Kirpal, J.—The petitioner seeks reference of the following questions to this Court:

"On the facts and in the circumstances of the case, whether the learned Tribunal was justified in upholding the disallowance of Rs. 2,89,129 out of the expenses incurred on account of repairs to machinery?

On the facts and in the circumstances of the case, whether the learned Tribunal was justified in confirming the disallowance of Rs. 46,004 out of the general charges being the expenditure on customary presents and gifts to the customers and business associates and also sustaining disallowance of Rs. 60,000 out of ad hoc disallowance made by the ITO in respect of the expenditure, the details of which were not asked for by the ITO ?

On the facts and in the circumstances of the case, whether the learned Tribunal was justified in sustaining the disallowance of Rs. 42,620 out of JK Steel division expenses incurred on account of small and customary presents to customers ?

On the facts and in the circumstances of the case, whether the learned Tribunal was justified in holding that interest charged under sections 139(8) and 215 of the income tax Act, 1961 is not appealable even though the assessee disputes the entire interest charged?"

As regards question Nos. 1 to 3 are concerned, in our opinion, they are pure questions of fact. The Tribunal has found the fact that these questions are not relatable to the business of the company and, therefore, were rightly disallowed. If expenses are not related to the business then they cannot be allowed and whether there is this relation or not, cannot be regarded as question of law.

As regards question No. 4 is concerned, we find that the Tribunal has stated in its order u/s 254 of the income tax Act, 1961 (''the Act) that the liability to pay interest under the said section is, however, not in issue. The Supreme Court in the case of Central Provinces Manganese Org Co. Lid v. CIT [1986] 160 ITR 961 1 has held that where the liability to pay interest is not in dispute then merely on the question of quantum an appeal against the levy is not maintainable. The learned counsel for the petitioner contends that the Tribunal is wrong in holding that the liability to pay interest was not in dispute. We, however, find that the petitioner has not challenged this finding of the Tribunal by way of a reference. Whether there was challenge to the liability or to the quantum is a question of fact because this challenge had to be raised before the Tribunal out of whose order reference is sought. When the Tribunal has observed that liability to pay interest was not in issue, it obviously means that such a contention was not raised before it. It is, no doubt, true that in the application u/s 256(2) of the Act it has been contended that there was a challenge to the liability itself because in the draft assessment order u/s 144B of the Act, there was no mention of the charging of interest and, therefore, when the final assessment order was passed interest could not be charged. Whereas, such a question has been raised in an earlier year and a reference has been called by us in IT Case No. 110 of 1988, we do not find any such question having been raised in the present case either before the Commissioner and certainly not before the Tribunal nor is the question which is proposed in the present case similar to the one which was proposed in IT Case No. 110 of 1988 where the question proposed specifically related to the liability of the petitioner to be subjected to interest when in the draft assessment order u/s 144B such a liability is not mentioned. If the liability had been challenged, then, according to the aforesaid decision of the Supreme Court, an appeal did lie but when the Tribunal holds, as it is done in the present case, there is no challenge to the liability to pay interest, we are afraid that we are bound by the aforesaid decision of the Supreme Court which states that in the absence of challenge to the liability no appeal is maintainable. Before concluding we may note that the learned counsel has cited before us a decision of the Division Bench of this Court in the case of Commissioner of Income Tax Vs. Mahabir Prashad and Sons, in which case it was held that challenge to the liability and the quantum of interest could be made in an appeal filed u/s 246(c) of the Act. We are afraid that in view of the aforesaid later decision of the Supreme Court, the observations of this Court, with regard to maintainability of an appeal on the ground of quantum alone no longer holds good. For the aforesaid reasons, petition is dismissed. There will be no order as to costs.