Delhi H.C : Whether the Tribunal was correct in law and on facts in deleting the disallowance of Rs. 85,722 on account of interest pertaining to priod prior to commencement of production in respect of acrylic, cement, SSF and nylon tyre cord plants on the basis of their own order for the asst. yr. 1971-72 when the order for the asst. yr. 1971-72 has not been accepted by the Department ?

Counsel Appeared

Jain & R.N. Verma, Advocate, for the Revenue : P.N. Monga, Advocate, for the Assessee

N. KIRPAL, J.:

In this petition under s. 256(2) of the IT Act the petitioner seeks a direction to the effect that the Tribunal should be- asked to refer the following questions of law to this Court:

(i) Whether the Tribunal was correct in law and on facts in deleting the disallowance of Rs. 85,722 on account of interest pertaining to priod prior to commencement of production in respect of acrylic, cement, SSF and nylon tyre cord plants on the basis of their own order for the asst. yr. 1971-72 when the order for the asst. yr. 1971-72 has not been accepted by the Department ?

(ii) (a) Whether the Tribunal was correct in law and-on facts in holding that the machinery installed by the assessee in the premises of JKCM admittedly used by the said company for the manufacture of their products, viz., nylon and cotton fabrics, was used by the assessee for its own business to the extent of 50per cent ?

(b) Whether the finding of the Tribunal that the machinery installed by the assessee in the premises of JKCM admittedly used by the said company for the manufacture of their produce, viz., nylon and cotton fabrics, was used by the assessee for its own business to the extent of 50per cent is based on a relevant finding or is based on surmises, conjectures and presumptions and partly irrelevant material ?

(iii) Whether the Tribunal was correct in law and on facts in holding that the assessee is entitled to full Insurance charges on the machinery installed in the premises of JKCM when, in asst. yr. 197576, on similar facts, the Tribunal have confirmed the disallowance to the extent of 50per cent ?

(iv) Whether the Tribunal was correct in law and on facts in confirming the order of the CIT (A) in directing the ITO to allow development rebate on all the units at the rate of 25per cent in view of the Tribunal’s decision for the asst. yr. 1971-72 ? In fact, these units did not fall under the category of priority industries within the meaning of s. 33(1)(b)(B)(i) of the IT Act, 1961 ?,

(v) Whether the Tribunal was correct in law and on facts in confirming the order of the CIT (A) in deleting the disallowance of Rs. 5,11,597 treated as income of the assessee on account of security deposit of cops ?

(vi) Whether the Tribunal was correct in law and on facts in holding that the addition of Rs. 20 lakhs made on account of estimated closing stock of cops was made only on the basis of surmises and thereby deleting the said addition ?

(vii) Whether the Tribunal was correct in law and on facts in confirming the order of the CIT (A) in deleting the amounts of Rs. 18,894 and Rs. 14,182 on account of foreign tour expenses of personal assistants to executives and personal assistants to directors, respectively ?

(viii) Whether the Tribunal was correct in law and on facts in deleting the disallowance of Rs. 75,263 on account of presentation to foreign business associates when in fact there is no nexus between such expenses and the carrying on of the assessee’s business?

(ix) Whether the Tribunal was correct in law and on facts in confirming the order of the CIT (A) in deleting the addition of Rs. 1,90,055 out of legal charges by following the Tribunal’s order for the assessment year 1971-72, which has not been accepted by the Department ?

(x) Whether the Tribunal was correct in law and on facts in confirming the order of the CIT (Appeals) in holding that the assessee is entitled to relief under s. 80J in respect of Nylon Unit-II in view of the decision of the Supreme Court in Lohia Machines Ltd., when, in fact, the issue involved in this case is regarding admissibility of the claim and not the working out of the quantum of deduction under s. 80J ?

(xi) Whether the Tribunal was correct in law and on facts in confirming the order of the CIT (A) in directing the ITO to make a fresh computation of depreciation allowance on the assets used for scientific research in the light of the judgment of the Supreme Court when, in fact, s. 35(2)(iv) clearly provided for disallowance of such a claim ?

(xii) Whether the Tribunal was correct in law and on facts in directing the ITO to allow depreciation on SSF and tyre cord units at the rate of 15per cent, as against 10per cent, allowed by the ITO, on the basis of their own order for the asst. yr. 1971-72, when the Tribunal’s order for the asst. yr. 1971-72 was not applicable, since both these units were added only in this year ?

(xiii) Whether the Tribunal was correct in law and on facts in deleting the addition of Rs. 20,09,620 on account of deduction in first grade production on the basis of their own order for the asst. yr. 1971-72, when, in fact, the order for the asst. yr. 1971-72 has not been accepted by the Department ?

In our opinion, only questions Nos. (i), (iii), (v), (ix) and (xii) should be referred. With regard to question, No. (i), we direct that the same should be rewarded in the manner as will be presently indicated.

With regard to questions Nos. (ii)(a) and (b), for the reasons stated in our judgment while disposing of ITC No. 136 of 1985 (CIT vs. J. K. Synthetics Ltd. (No. 1) (1989) 79 CTR (Del) 193 : (1990) 181 ITR 505), we are of the opinion that these two questions of law do not arise. Similar is the position with regard to question No. (iv). Question No. (vi) is a pure question of fact because it deals with an estimate which has been arrived at on surmises and which had been ordered to be deleted by the Tribunal. No principle of law is involved in deciding this question. Similarly, question No. (vii) which pertains to foreign expenses which have been incurred for the purposes of business tour in respect of personal assistants to the executives and to the directors is also a question of fact especially when, we are informed that the expenses incurred by these executives and directors have been allowed. Question No. (viii) pertains to disallowance which had been made by the ITO, which has been deleted in appeal on account of foreign business of the assessee. It cannot be denied that, for the purpose of business, presents are given to foreign business associates and merely because full details were not given, it cannot be a reason for coming to the conclusion that question of law arises when such disallowance is deleted by the appellate authority.

5. For the reasons stated in our judgment in ITC No. 136 of 1985 (CIT vs. J.K. Synthetics Ltd. (No. 1) (supra) question No. (x) is also not directed to be referred as the answer to the same is selfexplanatory. Questions Nos. (xi) and (xiii) also are not to be referred. As regards question No. (xi) is concerned, the Tribunal has directed the ITO to follow the judgment of the Supreme Court and it cannot be said that any question of law arises in respect hereto. As regards question No. (xiii), the Allahabad High Court, in respect of the asst. yr. 1971-72, has come to the conclusion that the said question is a question of fact and need not be referred. Following the said decision, we decline to ask for a reference in respect thereto.

6. Accordingly, we direct the Tribunal to state the case and refer the following questions to this Court: (i) Whether the Tribunal was correct in law and on facts in deleting the disallowance of Rs. 85,722 on account of interest pertaining to period prior to commencement of production in respect of acrylic, cement, SSF and nylon tyre cord plants ? (iii) Whether the Tribunal was correct in law and on facts in holding that the assessee is entitled to full insurance charges on the machinery installed in the premises of JKCM when in asst. yr. 197576, on similar facts, the Tribunal have confirmed the disallowance to the extent of 50per cent ? (v) Whether the Tribunal was correct in law and on facts in confirming the order of CIT (A) in deleting the disallowance of Rs. 5,11,597 treated as income of the assessee on account of security deposit of cops ? (ix) Whether the Tribunal was correct in law and on facts in confirming the order of the CIT (A) in deleting the addition of Rs. 1,90,055 out of legal charges ? (xii) Whether the Tribunal was correct in law and on facts in directing the ITO to allow depreciation on SSF and tyre cord units at the rate of 15 per cent as against 10 per cent ?

7. The petition is disposed of. No costs.

[Citation : 181 ITR 537]