Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the assessment order for the asst. yr. 1967-68 did not become time barred under sub-s. (1) of s. 153 of the IT Act, 1961, in view of the provisions of the Expln (1) to the said sub-section ?

Counsel Appeared

Ranka, for the Assessee : R.N. Surolia, for the Revenue

C. AGRAWAL, J.:

In this reference relating to the asst. yr. 1967-68 made at the instance of the assessee, Golcha Properties (P) Ltd., the Tribunal, Jaipur Bench, Jaipur, has referred the following questions for the opinion of this Court:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the assessment order for the asst. yr. 1967-68 did not become time barred under sub-s. (1) of s. 153 of the IT Act, 1961, in view of the provisions of the Expln (1) to the said sub-section ?

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the interest income of Rs. 5,11,363 had accrued and arisen in favour of the assessee in the previous year relevant for the asst. yr. 1967-68 ?

Whether, on the facts and in the circumstances of the case, and on a correct interpretation of the terms of the agreement dated October 31, 1955, and the consent decree dated February 25, 1959, the Tribunal is justified in holding that the assessee is not the owner of the cinema styled as Maratha Mandir and the machinery, plant, furniture, etc., installed in the said building by the assessee-company with its own resources and no depreciation is available to it in respect thereto ?

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in rejecting the alternative contention of the assessee that the amount spent by the assessee on the construction of the cinema known as Maratha Mandir and in purchasing the various movable assets installed therein out of its own funds, is neither a capital nor a revenue expenditure ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that r. 6C(3) of the IT Rules, 1962, does not override the provision of s. 37(3) of the IT Act, 1961 ? Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining the total disallowance of the guest house expenses incurred after August 10, 1966 ?

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that no appeal lies against the levy of penal interest under ss. 139 and 215 of the IT Act before the AAC of Income-tax under s. 246 of the IT Act, 1961 ? “

We have heard Mr. N. M. Ranka, learned counsel for the assessee, and Shri R. N. Surolia, learned counsel for the Revenue.

Mr. Ranka has fairly stated that questions Nos. 1, 2 and 4 are covered by the decision of this Court in D. B. IT Ref. No. 16 of 1978 and D. B. IT Ref. No. 24 of 1978, decided by this Court on January 20, 1987 [Golcha Properties (P.) Ltd. vs. CIT (1987) 166 ITR 259(Raj)], between the same parties. D.B. IT Ref. No. 16 of 1978 related to the asst. yr. 1965-66 and D. B. IT Ref. No. 24 of 1978 related to the asst. yr. 1966-67, and these very questions came up for consideration before this Court and they were answered against the assessee and in favour of the Revenue. For the same reasons, questions Nos. 1, 2 and 4 must be answered against the assessee and in favour of the Revenue.

As regards question No. 3, it has been stated by Mr. Ranka that it is covered by the decision of this Court in D. B. IT Ref. No. 16 of 1978, D. B. IT Ref. No. 24 of 1978 and D. B. IT Ref. No. 25 of 1978, decided by order dated January 20, 1987, between the same parties. D. B. Income-tax Reference No. 25 of 1978 related to the asst. yrs. 1959-60 and 1960-61 and this Court had answered the said question against the assessee and in favour of the Revenue. For the same reasons, this question must be answered against the assessee and in favour of the Revenue. Questions Nos. 5 and 6 are inter-connected and involve interpretation of s. 37(3) of the IT Act, 1961 and r. 6C(3) of the IT Rules, 1962 which was brought into force on August 10, 1966. Sub-s.(3) of s. 37 of the IT Act, 1961, runs as under : ” Notwithstanding anything contained in sub-s. (1), any expenditure incurred by an assessee after the 31st day of March, 1964, on advertisement or on maintenance of any residential accommodation including any accommodation in the nature of a guest-house or in connection with travelling by an employee or any other person (including hotel expenses or allowances paid in connection with such travelling) shall be allowed only to the extent, and subject to such conditions, if any, as may be prescribed. “

In accordance with the terms of the said sub-section, conditions have been prescribed under r. 6C (3) of the IT Rules, 1962, which provides as under: ” No allowance shall be made in respect of expenditure incurred on the maintenance of any residential accommodation in the nature of a guest house unless the assessee maintains a register showing the following particulars.”

5. By the said rule, it has been prescribed that allowance shall be made in respect of expenditure incurred on the maintenance of any residential accommodation in the nature of a guest house only if the assessee maintains a register for the particulars prescribed in the said rule. In other words, r. 6C(3) prescribes the conditions subject to which expenditure referred to in sub-s. (3), of s. 37 would be permissible as an allowable deduction. In our opinion, the Tribunal was, therefore, right in taking the view that the assessee could claim deduction in respect of expenditure incurred on the maintenance of a residential accommodation in the nature of a guest house only if it fulfilled the requirements of r. 6C(3) of the Income-tax Rules, 1962. In that view of the matter, questions Nos. 5 and 6 must be answered in favour of the Revenue and against the assessee.

With regard to question No. 7, Mr. N. M. Ranka has invited our attention to the decisions of this Court in CIT vs. Devi Chand Panmal (1986) 52 CTR (Raj) 34:(1986) 160 ITR 545(Raj) and Barmer Disposal Auto Parts vs. CIT (1987) 61 CTR (Raj) 61:(1987) 163 ITR 690, wherein this Court has taken the view that the question with regard to levy of interest under ss. 139 and 217 of the IT Act, 1961, could be agitated in an appeal filed by the assessee against the assessment order.

In view of the aforesaid decisions, it must be held that the Tribunal was not justified in holding that no appeal lay against the levy of penal interest under ss. 139 and 215 of the IT Act, before the AAC under s. 246 of the IT Act, 1961. The said question must be answered in favour of the assessee and against the Revenue.

In the result, questions Nos. 1, 2, 3, 4, 5 and 6 are answered in the affirmative i. e., in favour of the Revenue and against the assessee and question No. 7 is answered in the negative i. e., in favour of the assessee and against the Revenue. No order as to costs.

[Citation : 169 ITR 525]