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

Sanjay Kishan Kaul, J.—The captioned reference pertained to assessment year 1984-85. The reference is at the behest of the Assessee. We have been called upon to adjudicate the following question of laws:

(i) Whether on the facts and in the circumstances of the case, the Ld. ITAT was legally justified in holding that only 50% of the total expenses of Kamla Retreat is admissible as revenue deduction?

(ii) Whether on the facts and in the circumstances of the case, the Ld. Tribunal was right in law to hold that disallowance of depreciation on guest house building amounting to Rs. 1,10,606/- was warranted and that the provisions of Section 37(4) have overriding effect over the provisions of Section 32 of the Act?

(iii) Whether on the facts and in the circumstances of the case, the Ld. Tribunal was legally justified in holding that the expenditure of Rs. 21,950/- (Rs. 15000/-, Rs. 6,590/-) on feasibility reports of the projects which was finally abandoned was capital expenditure?

(iv) Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in disallowing the retainership fee paid to two consultants amounting to Rs. 1,52,000/- holding the same to be of capital nature?

(v) Whether on the facts and in the circumstances of the case, the Ld. Tribunal was legally justified in confirming the disallowance on travelling expenses amounting to Rs. 10,974/- on the ground that it relates to new project and dos not relate to existing business?

(vi) Whether on the facts and in the circumstances of the case, the Ld. Tribunal was legally justified in confirming the disallowance of foreign travelling expenses amounting to Rs. 94,560/- incurred in connection with the mini Hydel plant and set up holding the same to be capital expenditure?

(vii) Whether on the facts and in the circumstances of the case, the Ld. Tribunal was legally justified in holding that two amounts of Rs. 22,238/- and Rs. 11,716/- out of foreign tour expenses to be capital nature?

(viii) Whether on the facts and in the circumstances of the case, the Ld. Tribunal was legally justified in holding that tour expenses to Kenya incurred on the employees of the company amounting to Rs. 5,288/- do not qualify for weighted deduction u/s 35B of the Act?

(ix) Whether on the facts and in the circumstances of the case, the Ld. ITAT was legally justified in holding that interests of Rs. 40,18,498/- payable on the provisional retention price received as per the hon''ble Delhi High Court''s order is not admissible deduction?

(x) Whether on the facts and in the circumstances of the case, the Ld. ITAT was legally justified in holding that expenditure on samples (Rs 1,40,376), export market development expenses (Rs 23,081) and tour expenses to attend seminars & trades (Rs 27,757) are hit by the provisions of Section 37(3A)?

In so far as question No. (i) is concerned, a similar question of law was returned unanswered by this Court while rendering its decision in ITR No. 138/1988. We are informed that the question in ITR 138/1988 was returned unanswered because of the amount being miniscule. We adopt the same methodology in the instant case as the amount involved is Rs. 88,588/-. The question is returned unanswered. The result in effect is that the finding of the Tribunal will stand sustained. The question is answered against the Assessee.

In so far as question Nos. (ii) to (viii) & (x) are concerned the learned Counsel for the Assessee says that in view of the amount being miniscule, he does not wish to press the said questions. Accordingly, these questions are returned unanswered.

In so far as question No. (ix) is concerned, we have answered a similar question in ITR No. 368/1992. In the said ITR we have come to the conclusion that since the liability had not crystalised in the assessment year in issue, no deduction could be claimed by the Assessee. Both parties agree that the same course of action be employed. Accordingly, we direct this question is decided in favour of the revenue for the assessment year in issue.

With the aforesaid observations the reference is disposed of.