Delhi H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in placing the onus on the ITO to apply rr. 117A and 40 of the IT Rules when the assessee has not made any application for waiver of interest under the said rules ?

Counsel Appeared

D.K. Jain & D.C. Taneja, for the Revenue : G.C. Sharma & Ms. Amita Gupta, for the Assessee

RANGANATHAN, J.:

Four questions are sought to be got referred to this Court under s. 256(2), IT Act, 1961, in relation to an order passed by the Tribunal in the case of the respondent-assessee for the asst. yr. 1975-76.

2. The first question of which reference is sought reads as follows:

” Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in restoring to the file of the ITO the matter relating to the admissibility of depreciation allowance on the assets used for scientific research when the ITO had made no disallowance on the basis of the amended provisions of s. 35(2)(iv) referred to by the Tribunal ?”

3. We find that so far as this point is concerned, the Tribunal has simply remanded the matter to the ITO for being decided according to law after the decision of the Supreme Court in a writ petition filed by the assessee challenging the vires of a retrospective amendment to s. 35(2)(iv) of the IT Act, 1961. Counsel for the CIT states that the Tribunal’s direction to the ITO is only to consider the matter afresh in the light of the Supreme Court decision and that the Tribunal has not expressed any opinion in regard to the point that came up before it as to whether even without the amendment of the section referred to above, the assessee is entitled to the depreciation allowance claimed or not. There is some substance in this contention. However, as we read the order of the Tribunal, the Tribunal has not confined the scope of the remand. The Tribunal’s order is clearly to the effect that if the Supreme Court holds that the amendment to s. 35(2)(iv) is valid, then the matter has to be decided in accordance with that decision. If, on the other hand, the Supreme Court holds the amendment to be invalid, the question would have to be redecided in terms of the position as it stood before the amendment. Of course, as counsel for the assessee has pointed out, in the latter event, this virtually means perhaps the redecision of the question by the ITO and the appellate authority and then by the Tribunal on the same lines as has been done earlier. However, we do not think that any economy of time or proceedings can be effected by calling for a reference of the question as to whether the Tribunal should have decided the issue on the merits even at this stage. We have no doubt that the Tribunal has left the entire issue open for reconsideration by the ITO and in these circumstances, question No. 1 is academic.

4. The second question of which reference is sought reads as follows: “Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that expenditure of Rs. 35,423 fell within the meaning of s. 37(3) and it was not of capital nature ? “

5. Counsel for the Department submits that the Department had asked for a reference of the following question to this Court so far as this aspect is concerned :

” Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that expenditure of Rs. 35,423 fell within the meaning of s. 37(3) and it was not of capital nature ? ” Counsel agrees that the Tribunal has already referred to this Court a question in the following terms:

” Whether, on the facts and in the circumstances of the case, the Tribunal was right in restoring the claim for deduction of the expenditure of Rs. 35,423 to the ITO in terms of s. 37(3) of the IT Act, 1961 ? “

6. But, then, the grievance of counsel is that the question referred by the Tribunal leaves out the second limb or aspect raised in the question posed by the CIT and calls for consideration, by this Court, namely, as to whether the advertisement expenditure in question was liable to be disallowed because it was capital in nature or not. We are, however, of the opinion that the question as referred by the Tribunal already is quite comprehensive and includes the aspect mentioned by counsel. This is because, before deciding whether s. 37(3) is applicable to the case or not, it is necessary for this Court, in view of the approach of the Tribunal, to come to a conclusion as to whether the terms of s. 37(3) will apply only where the expenditure in question is of revenue nature or whether it will apply irrespective of whether it is capital or revenue as observed by the Tribunal. In other words, the question as already referred by the Tribunal also involves consideration of the aspect regarding the capital nature of the expenditure in questions. In this view of the matter, we do not think that the further aspect mentioned by counsel needs to be referred independently.

7. The third question of which reference is sought reads as follows:

” (a) Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in placing the onus on the ITO to apply rr. 117A and 40 of the IT Rules when the assessee has not made any application for waiver of interest under the said rules ?

(b) Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in entertaining the ground of appeal on the point of waiver of interest under rr. 117A and 40 when no appeal on the applicability or otherwise of these rules could be entertained by it ?

(c) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in entertaining the appeal on the point of waiver of interest under rr. 117A and 40 when it was not the subject-matter of appeal before the CIT (A) ? “

8. The question whether the Tribunal was at all competent to deal with the question of waiver of interest is clearly a question of law in view of the recent decision by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. vs. CIT (1986) 58 CTR (SC) 112 : (1986) 160 ITR 961 (SC). The question applied for by the CIT, therefore, calls for a reference. However, as pointed out by counsel for the assessee, part (a) of the question referred to above cannot be referred because the Tribunal has found as a fact that the assessee had made an application for waiver of interest to the ITO. We, therefore, direct the Tribunal to state a case and refer for the decision of this Court only parts (b) and (c) of question No. 3 as set out above.

9. So far as question No. 4 is concerned, the applicant has framed it in the following terms: ” 4. Whether, on the facts and in the circumstances of the case, the Tribunal acted within its jurisdiction in admitting the additional ground of appeal about higher rate of depreciation at 15 per cent when this was not the subject-matter of appeal before the CIT (A) and the depreciation allowance allowed by the ITO at 10 per cent was as per claim of the assessee before the ITO ? “

10. After hearing both counsel at some length and in view of the decision the Supreme Court in Addl. CIT vs. Gurjargravures P. Ltd. 1978 CTR (SC) 1 : (1978) 111 ITR 1 (SC) and of this Court in CIT vs. Anand Prasad (1981) 128 ITR 388 (Del), we think that the question raised calls for further consideration. We, therefore, direct the Tribunal to state a case and refer this question also for the decision of this Court.

11. In the result and for the reasons mentioned above, the application is rejected in so far as questions Nos. 1, 2 and 3(a) are concerned, but questions Nos. 3(b) and (c) and 4 set out above are directed to be referred. The application is disposed of accordingly. No order is made as to costs.

[Citation : 172 ITR 390]