S.P. Goyal, J.
1. The assessee, a private limited company, is engaged in the transport business with its head office at Ludhiana. The dispute relates to the assessment year 1969-70, wherein the assessee claimed deduction of Rs. 2,77,364 as business expenditure. This amount was paid by the assessee on account of the income-tax liability of Khalsa Nirbhai Transport Company (Private) Ltd., part of whose business had been purchased by it in July, 1964. The ITO disallowed this claim and his order was confirmed on appeal by the AAC.
2. In second appeal before the Tribunal it was urged that a similar expenditure had been allowed in the earlier years by this court, vide judgment dated October 23, 1973, Dashmesh Transport Co. P. Ltd. v. CIT (annex. ' F ') and that judgment would operate as res judicata and that the assessee had incurred the said expenses in the discharge of its liability as contained in Article 18 of the articles of association of the company in the ordinary course of its business and the same, therefore, was deductible as business expense. Both the contentions were negatived by the Tribunal, which found that the earlier judgment did not operate as res judicata and that the expenditure in question was incurred by the assessee for acquiring income-earning apparatus and was thus a capital expense. Still dissatisfied, the assessee moved an application under Section 256(1) of the I.T. Act, 1961 (hereinafter called 'the Act'), which has resulted in the reference of the following three questions for the opinion of this court :
' 1. Whether, on the facts of the case, the Tribunal was right in law in holding that a fresh decision as to the allowability of the expenditure of Rs. 2,77,360 as a deduction under Section 37(1) of the Income-tax Act was not barred by the Tribunal's decision in the case relating to the assessment year 1966-67 (decided on March 23, 1974) ?
2. If the opinion on question No. 1 goes against the assessee, whether, on the facts of the case, the Tribunal was right in holding that the expenditure of Rs. 2,77,360 representing the liabilities of Khalsa Nirbhai Transport Co. Pvt. Ltd., discharged by the assessee, was in the nature of capital expenditure ?
3. If the opinion on question No. 2 goes in favour of the assessee, whether, on the facts of the case, the Tribunal was right, in law, in holding that neither the expenditure of Rs. 2,38,684 (representing the income-tax liability of the transferor-company) nor the expenditure of the balance of Rs. 38,676 (representing the other liabilities of the transferor-company) had been laid out for the assessee's business wholly and exclusively as contemplated in Section 37(1) of the Income-tax Act '
3. A perusal of the judgment, annex. ' F ', would show that in the earlier case, the Tribunal did not express any opinion on the question as to whether the expenditure incurred by the assessee-company was the capital expenditure or business expenditure and instead disallowed the deduction on the ground that the same was barred by the provisions of Section 40(a)(ii) of the Act. On a reference under Section 256(1) of the Act, the Division Bench of this court (Dashmesh Transport Co. Ltd. v. CIT reversed that finding of the Tribunal and there arose no occasion to express any view on the question of the nature of expenditure. As no opinion has been expressed in the judgment as to whether the alleged expenditure wasthe capital expenditure or a business expense, the judgment cannot, by any stretch of reasoning, operate as res judicata. Otherwise also, it is well settled that a finding on any matter in relation to a particular year of assessment does not operate as fes judicata on a similar question in the subsequent assessment year. Question No. 1, therefore, is answered in the affirmative, in favour of the revenue and against the assessee.
4. On the second question, Mr. G. C. Sharma, the learned counsel for the assessee, argued that the expenditure incurred by the assessee would not be a capital expenditure unless the assessee-company had knowledge of the liability of Khalsa Nirbhai Transport Company (P.) Ltd. and this liability forms part of the consideration paid by the assessee for acquiring group ' A ' transport of the transferor-company. The contention of the learned counsel is wholly misconceived. Although the terms and conditions of the transfer had not been proved on the record but it is evident from Article 18 of the articles of association of the assessee-company that it had taken over all the assets and liabilities of the transferor-company. The conclusion is, therefore, irresistible that the liabilities of the said company form part of the consideration for the acquisition of group ' A ' transport of the transferor-company. The Tribunal, therefore, rightly came to the conclusion that the expenditure of Rs. 2,77,360 representing the liability of Khalsa Nirbhai Transport Company (P.) Ltd. and discharged by the assessee, was in the nature of capital expenditure. Question No. 2, accordingly is also answered in the affirmative, in favour of the revenue and against the assessee.
5. As suggestion No. 2 has been answered against the assessee, question No. 3 has become redundant and need not be answered. No costs.
B.S. Dhillon, J.
6. I agree.