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Commissioner of Income-tax Vs. Oswal Woollen Mills Limited - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Case No. 20 of 1985
Judge
Reported in[1987]163ITR207(P& H)
ActsIncome Tax Act, 1961 - Sections 35B, 256(1) and 256(2)
AppellantCommissioner of Income-tax
RespondentOswal Woollen Mills Limited
Appellant Advocate Ashok Bhan and; Ajay Mittal, Advs.
Respondent Advocate G.C. Sharma and; S.S. Mahajan, Advs.
Excerpt:
.....the making of the order either actually or constructively it may claim that the period of limitation would start running from the date it acquires knowledge of the making of an order but one cannot understand how a party, who has acquired knowledge of the making an order either directly or constructively can ignore the same and belatedly seek redress just because the authority making the order had made a default in formally communicating the order to him. allowing a party to do so would amount to placing a premium on the lack of diligence of a party, who is remiss in seeking a remedy that was available to it. therefore, knowledge whether actual or construction of the order passed by the state or regional transport authority should result in commencement of the period of limitation...........on the facts and in the circumstances of the case, the appellate tribunal was right in law in allowing deduction under section 80j in respect of various units on the capital employed without deducting the borrowed money and debts owned by the assessee in complete disregard of the amended provisions of section 80j ? (b) whether, on the farts and in the circumstances of the case, on a proper interpretation of section 35b of the income tax act, 1961, the appellatetribunal was right in law in allowing weighted deduction on the following items of expenditure claimed by the assessee for the assessment year 1976-77. (i) commission/service charges paid to the stc/hhec. (ii) ecgc charges and premium. (iii) subscription to the hosiery export corporation. (iv) part of the expenses under the.....
Judgment:

S.P. Goyal, J.

1. The assessee-company filed its return for the assessment year 1976-77 declaring an income of Rs. 69,78,040 which was subsequently revised on August 30, 1986, reducing the said amount to Rs. 69,74,066. In the course of the assessment proceedings, since the variation exceeded Rs. 1,00,000, the Income-tax Officer sent a draft of the proposed order to the assessee on March 27, 1979.

2. After considering the objection filed by it, he forwarded the draft order together with the objection to the Inspecting Assistant Commissioner and on receipt of direction from him under Section 144B(4) of the Income-tax Act, 1961, issued an assessment order on September 24, 1979, disallowing many deductions claimed by the assessee such as deduction on surtax, depreciation on vanaspati plant, annual depreciation in respect of new hosiery machinery, extra shift allowance on weigh bridge, weighted deduction under Section 35B, depreciation on car and claim in respect of leave with wages. The assessing authority also made heavy additions on account of the alleged inflation in purchase of oil in vanaspati unit, at Ludhiana, some costs of rice bran and deflation of sales. A partial relief was given to the assessee by the Commissioner of Income-tax (Appeals) against which both the Revenue and the assessee filed appeals before the Tribunal.

3. The appeal filed by the Revenue was dismissed and some more relief was given to the assessee in his appeal which led the Revenue to move an application under Section 256(1) of the Income-tax Act for getting the following questions referred to this court:

Question of law in ITA No. 168/CHANDI/80

'(a) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing deduction under Section 80J in respect of various units on the capital employed without deducting the borrowed money and debts owned by the assessee in complete disregard of the amended provisions of Section 80J ?

(b) Whether, on the farts and in the circumstances of the case, on a proper interpretation of Section 35B of the Income tax Act, 1961, the AppellateTribunal was right in law in allowing weighted deduction on the following items of expenditure claimed by the assessee for the assessment year 1976-77.

(i) Commission/service charges paid to the STC/HHEC.

(ii) ECGC charges and premium.

(iii) Subscription to the Hosiery Export Corporation.

(iv) Part of the expenses under the heads 'Salary', 'Subscription', 'Electricity', 'Postage and Telegram', 'Stationery and Printing', 'Office expenses', etc. ?

(c) Whether, on the facts and in the circumstances of the case, in the absence of there being anything on the record connecting the aforesaid items of expenditure wholly or in part with the specific activities mentioned in Section 35B(1)(b) of the Act, the Appellate Tribunal was right in law in allowing weighted deduction on the aforesaid items of expenditure simply because they were connected with assessee's export business ?

(d) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing assessee's claim for leave with wages, ignoring the fact that this was not an ascertained liability, but a contingent liability and hence not allowable under the law Question of law in ITA No. 185/CHANDI/80.

(e) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing deduction under Section 80J in respect of various units on the capital employed without deducting the borrowed money and debts owned by the assessee in complete disregard of the amended provisions of Section 80J ?

(f) Whether, on the facts and in the circumstances of the case, and on a proper interpretation of Section 35B of the Income-tax Act, 1961, the Appellate Tribunal was right in law in allowing weighted deduction on the following items of expenditure claimed by the assessee for the assessment year 1976-77 :

(i) Commission/service charges paid to the STC/HHEC.

(ii) Subscription to the Hosiery Export Corporation.

(iii) ECGC charges and premium.

(iv) Part of the expenses under the heads 'Salary', 'Subscription', 'Electricity', 'Postage and Telegram', 'Stationery and Printing,' 'Office expenses', etc. ?

(g) Whether, on the facts and in the circumstances of the case, in the absence of there being anything on the record connecting the aforesaid items of expenditure wholly or in part with specific activities mentioned in Section 35B(1)(b) of the Act, the Appellate Tribunal was right in law in allowing weighted deduction on the aforesaid items of expenditure simply because they were connected with the assessee's export business ?'

The application having been declined by the Tribunal, the Revenue has come to this court for a mandamus under Section 256(2) of the Income-tax Act.

4. The learned counsel for the parties are agreed that questions (a) and (e) have become infructuous in view of the rectification order of the Tribunal, dated June 23, 1985. Also there is no dispute that the questions (b) and (c) in ITA No. 168 of 1980 and entered as (f) and (g) in ITA No. 185 of 1980 are questions of law arising from the order of the Tribunal.

5. As regards question (d), the learned counsel for the assessee contended that the same has been decided by the Tribunal in view of the decision of the conference of the Commissioners noticed by the Delhi High Court in CIT v. Jay Engineering Works [1984] 145 ITR 297. It was also urged that the accounting system employed by the assessee being mercantile, the claim for leave with wages was rightly allowed. Both the contentions raised are on the merits of the controversy and do not show that the question framed is not a question of law. As a matter of fact, from the contention of the learned counsel for the assessee also, it is apparent that the question framed is certainly a question of law and the Tribunal wrongly declined to refer it because of its view on the merits of the controversy. Accordingly a mandamus is issued to the Tribunal to refer the question entered at (b), (c) and (d) in ITA No. 168/CHANDI/80 together with the statement of the case. No costs.


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