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Commissioner of Income Tax v/s J. K. Synthetics Limited

    ITC No. 211 of 1987

    Decided On, 08 August 1990

    At, High Court of Delhi

    By, THE HONOURABLE MS. JUSTICE SANTHOSH DUGGAL & THE HONOURABLE MR. JUSTICE B.N. KIRPAL

    For the Appearing Parties : -----



Judgment Text

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

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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 travelling by the wives of the employees and two other employees is expenditure for the purpose of business of the assessee 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 assessee himself has admitted in the assessment year 1979-80 that the Income-tax Appellate Tribunal's finding that the acrylic business was already in existence stands controverted by the assessee'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 assessee 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 assessee ?


(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 assesseecompany 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 v. CIT 1982 (138) ITR 653, 1982 (31) CTR 305, 1982 (31) CTR(Del) 305?


(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 Incometax Officer especially when the assessee's case does not fall under section 33(1)(b)(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 Incometax 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 under section 80J for the assessment years 1973-74 and 1974-75 which is to be brought forward and set off under section 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 assessee for relief under section 80J is still to be adjudicated upon ?


(xiii) Whether the Income-tax Appellate Tribunal was correct in law and on facts in holding that the assessee is entitled to relief under section 80J on the F. E. M. and cement divisions by treating these divisions as separate industrial undertakings, especially when the assessee'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 assessee-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 assessee ?"


The Income-tax Appellate Tribunal, under section 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 are 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 assessee 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 questionQuestion No. 7 is similar to the question which had been raised in an earlier petition which was disposed of by our decision reported as CIT v. J. K. Synthetics Ltd. (No. 1) 1990 (181) ITR 505, 1989 (79) CTR 193, 1989 (47) TAXMAN 476, 1989 (79) CTR(Del) 193; CIT v. J. K. Synthetics Ltd. (No. 2) 1990 (181) ITR 537, and CIT v. J. K. Synthetics Ltd. (No. 1) 1990 (182) ITR 125, 1989 (79) CTR 197, 1989 (47) TAXMAN 395, 1989 (79) CTR(Del) 197, 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 CIT v. Jay Engineering Works Ltd. 1990 (182) ITR 181,

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. v. CIT 1981 (130) ITR 238, 1981 (5) TAXMAN 214 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 CIT v. J. K. Synthetics Ltd. (No. 1) 1990 (181) ITR 505, 1989 (79) CTR 193, 1989 (47) TAXMAN 476, 1989 (79) CTR(Del) 193, 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
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