Addl. Commissioner of Income Tax vs Motipur Sugar Factory (P.) Ltd.

P.S. Sahay, J.—At the instance of the Income Tax department the following question of law has been referred for the consideration of this court:

"Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 8,152 incurred on account of the foreign tour of the director is a business expenditure and allowable as such within the meaning of Section 10(2)(xv) of the Indian Income Tax Act, 1922, corresponding to Section 37 of the Income Tax Act, 1961 ?"

The assessee is a private limited company having its registered office at Motipur and carrying on business of manufacturing of sugar. For the assessment year 1961-62, year ending September 30, 1960, the assessee claimed Rs. 8,152, the amount spent by one of the directors of the company for attending the 10th Congress of International Society of Sugarcane Technologists held in Honolulu, which was not accepted by the ITO and the order was affirmed by the AAC. On further appeal, the Tribunal allowed the claim holding that the purpose of the tour of the director was to acquire the latest technique of sugar production and, thus, it was closely connected with the business of the assessee and, therefore, it could not be said that the tour was undertaken for non-business purposes. Against that the department moved for a reference to this court which was rejected. Thereafter, an application u/s 256(2) of the I.T. Act was filed on behalf of the department and this court, as stated earlier, had directed the Tribunal to refer the question, quoted above, for consideration.

Learned standing counsel, appearing on behalf of the department, has submitted that the tour of the director was not connected with the businessand, therefore, has been wrongly allowed by the Tribunal and, secondly, he has submitted that the tour was undertaken in May, 1959, and the sanction of the board of directors was given on 10th March, 1960, which was for a different assessment year and, therefore, not allowable for the assessment year in question. So far as the first point is concerned, it has been submitted by Mr. Jain, appearing on behalf of the assessee, that the tour was closely connected with the business and, therefore, it was rightly allowed as business expenditure and in support of his contention has relied on the decisions in Commissioner of Income Tax, Delhi Vs. M.S. Shroff, , The Commissioner of Income Tax Central, New Delhi Vs. P.N. Behl, and Sayaji Iron and Engineering Works Pvt. Ltd. Vs. Commissioner of Income Tax, Gujarat II, .

On the face of those decisions the learned standing counsel has fairly conceded that the amount was rightly allowed by the Tribunal. But he has submitted that the amount was spent in May, 1959, which was for the year 1960-61 and could not be allowed in the year 1961-62, because, admittedly, the tour was not undertaken in this year. Mr. Jain has, however, submitted that whether the Amount was allowable for the year in question was never agitated either before the Tribunal or before this court in their application for a reference and the Tribunal, being the final court of fact, this cannot be agitated in this court and the aforesaid finding is binding on the High Court. In support of his contention reliance has been placed on a number of decisions which I propose to discuss. In the case of MANOHAR DAS MUNNI LAL Vs. SECRETARY OF STATE FOR INDIA., , it has been laid down that the assessee could not be allowed to turn a mere question of fact into one of law by asking whether, as a matter of law, the officer came to a correct conclusion upon a matter of fact, and, as the I.T. authorities had not misdirected themselves on any question of law, there was no question of law upon which the Commissioner could so require to state the case u/s 66(3) of the Indian I.T. Act. Mr. Jain, while relying on the finding of the Tribunal, has submitted that the point whether the same was allowable in the assessment year in question was not raised and, therefore, was not decided and, in that view of the matter, the department was completely precluded from agitating this point in the High Court. In this connection, it will be useful to refer to the observations of their Lordships of the Supreme Court in the case of Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., , where their Lordships, after considering a number of decisions, held as follows:

"(1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.

(2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order.

(3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.

(4) When a question of law is neither raised before the Tribunal nor considered by it, it will hot be a question arising out of its order notwithstanding that it may arise on the findings given by it."

Learned standing counsel, in reply to the aforesaid submission, has submitted that the pertinent question to be considered was as to when liability was incurred and not when it was credited and has strongly relied on the decision of Nonsuch Estate Ltd. Vs. The Commissioner of Income Tax, Madras, . In that case, assessment year 1959-60 was involved and the question referred was whether the remuneration of the managing agent for the period April 1, 1956, to June 30, 1957, was deductible in the computation of the income of the previous year ending on 30th June, 1958, and their Lordships held that the liabilities could not have been said to have arisen from any date prior to the 2nd September, 1957, when the approval was given. But in that case the question of fact was specifically raised which will be clear from the order of reference itself. But that is not the position in the instant case.

In view of the aforesaid discussion, it is clear that the finding recorded by the Tribunal must be taken as final and, therefore, the argument raised on behalf of the department has to be rejected. The question of law is, therefore, answered in the affirmative, in favour of the assessee and against the department. In the circumstances of the case, there will be no order as to costs.

K.B.N. Singh, C.J.

I agree.