Commissioner of Income Tax vs Aluminium Industries Ltd.

K.S. Paripoornan, J.—The Revenue is the applicant in this case. The respondent-company is an assessee to Income Tax. We are concerned with the assessment year 1976-77. The respondent is carrying on a business in the manufacture of conductors, switch gears and machinery. It claimed weighted deduction of 50% of Rs. 1,62,924 u/s 35B of the Income Tax Act. The expenses were incurred for maintenance of an export house at Ernakulam. The claim was disallowed by the Income Tax Officer. The Commissioner of Income Tax (Appeals) concurred with the said decision. In further appeal, the Income Tax Appellate Tribunal relied upon the decision of the Special Bench of the Tribunal in J. Hemchand and Co.''s case and held that the whole expenditure incurred in the office of the export house is relatable to Clauses (i), (iv), (v) and (vi) of Section 35B of the Act and so the relief in respect of that expenditure to the extent of 50% of Rs. 1,62,924 by way of weighted deduction is allowable. The appeal filed by the respondent (assessee) was allowed. On a motion by the Revenue, the Income Tax Appellate Tribunal has referred the following question of law for the decision of this court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to claim weighted deduction of 50% in respect of export house expenses ?"

We heard counsel for the Revenue, Mr. Menon, and also counsel for the respondent-assessee. The Appellate Tribunal has found that the expenses, for which relief was claimed, were incurred for maintenance of an office in Cochin. It is an office expenditure. Counsel for the Revenue submitted that in view of the Division Bench decision of this court in Commissioner of Income Tax Vs. C. Tharian and Sons, , on the finding entered by the Tribunal, the assessee is not entitled to 50% of the deduction by way of weighted deduction. On the other hand, counsel for the respondent-assessee submitted that whatever may be the interpretation placed on Section 35B of the Act by this court, the assessee is entitled to the relief u/s 35B of the Act, in view of the Circular of the Board of Revenue dated December 28, 1981. It is argued that the decision of the Special Bench in Income Tax References Nos. 3255 and 3330 (Bom) of 1976-77 was (substantially) accepted by the Central Board of Direct Taxes and the circular dated December 28, 1981, have been issued in that behalf, The circular, as such, is not produced before us, But reference is made to the said circulars in the decision of the Allahabad High Court in Commissioner of Income Tax Vs. Novelty Trading Corporation and Others, and Commissioner of Income Tax, Delhi-I Vs. Jay Engineering Works, . The submission was that the assessee is entitled to the said administrative relief as detailed in the circular and that the relief in the instant case has been allowed in accordance with the decision of the Special Bench in J. Hemchand and Co.''s case which has been substantially accepted by the Central Board of Direct Taxes in the circular dated December 28, 1981, aforesaid.

The decision of the Special Bench of the Tribunal, relied on by the Appellate Tribunal in J. Hemchand and Co.''s case, is not before us. The circular also is not before us. In such circumstances, we are not in a position to effectively adjudicate on the question referred to us by the Appellate Tribunal. Even if the decision of this court in Commissioner of Income Tax Vs. C. Tharian and Sons, , is applicable, that will not be sufficient to adjudicate finally on the question referred to us. We should state that the decision in Commissioner of Income Tax Vs. C. Tharian and Sons, itself was doubted by a Bench of this court in Income Tax References Nos. 91 to 102, 203 and 211 of 1984 in the judgment dated June 18, 1987. That apart, if the assessee is entitled to relief on the basis of the circular dated December 28, 1981, which has, for the most part, accepted the decision of the Special Bench of the Tribunal in J. Hemchand and Co.''s case, that is a matter for verification.

Placed in the above circumstances, we are of the view that this is one of the cases where we should decline to answer the question referred to us by the Appellate Tribunal. The Appellate Tribunal shall advert to the decision of the Special Bench in Income Tax Appeals Nos. 3255 and 3330 (Bom) of 1976-77 (J. Hemchand and Co.''s case) as also the circular of the Central Board of Direct Taxes dated December 28, 1981, which are seen mentioned in Commissioner of Income Tax Vs. Novelty Trading Corporation and Others, and in Commissioner of Income Tax, Delhi-I Vs. Jay Engineering Works, . We decline to answer the question referred to us. At the same time, we direct the Income Tax Appellate Tribunal to restore the appeal to the file and adjudicate on the question in the light of the decision of the Special Bench in J. Hemchand and Co.''s case, to the extent it has been adopted or incorporated by the circular of the Central Board of Direct Taxes dated December 28, 1981. The Appellate Tribunal shall decide the appeal afresh in the light of the observations contained hereinabove, The Commissioner of Income Tax (Revenue), Trivandrum, shall place the relevant circular before the Income Tax Appellate Tribunal when the matter is again posted for hearing.

We decline to answer the question posed before us in the above circumstances.

A copy of this judgment under the seal of this court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.