Commissioner of Income Tax vs Assam Asbestos Ltd.

D.N. Baruah, J.—In this application u/s 256(2) of the Income Tax Act, 1961, the Department has prayed for a direction to refer the following two questions for the opinion of this court :

"(1) Whether, on the facts and in the circumstances of the case, provision for expenses on foreign tour of the dealer amounting to Rs. 3,41,043 is an allowable business expenditure and if so, whether the Tribunal is correct in law in upholding the Commissioner of Income Tax (Appeals)''s order deleting the disallowance made ?

(2) If the answer to question No. 1 is in the affirmative whether such expenditure is in the nature of entertainment expenditure whose allowability is restricted as per provision of Sub-section (2A) of Section 37 of the Income Tax Act, 1961 ?"

The respondent-company carries on the business of manufacture and sale of asbestos. The respondent/assessee claimed a deduction of Rs. 3,41,043 from the income as the said amount was provided towards expenditure for undertaking foreign tour. The claim was rejected by the Assessing Officer. The respondent being aggrieved preferred an appeal before the Commissioner of Income Tax (Appeals) at Guwahati. The contention of the assessee was accepted by the Commissioner of Income Tax (Appeals). The Department approached the Tribunal and the Tribunal also confirmed the order of the Commissioner of Income Tax (Appeals). According to the Department, the amount of Rs. 3,41,043 earmarked for payment on account of incentive to the dealers by way of undertaking foreign tours is not a business expenditure and, therefore, the assessee is not entitled to get any deduction u/s 37 of the Income Tax Act. As the Tribunal refused to interfere with the order of the Commissioner of Income Tax (Appeals), the Department requested the Tribunal to refer the aforesaid two questions for the opinion of this court. This was also rejected. While rejecting the request, the Tribunal observed thus :

"After consideration of all the facts and circumstances of the case, the Tribunal came to the conclusion that the liability provided was an ascertained liability and was rightly claimed as a deduction during the year, 11. was observed that the liability accrued as soon as the dealers achieved the pre-determined fixed targets although the payment may have been made later. In this view of the matter, the order of the Commissioner of Income Tax (Appeals) was confirmed. 6. In view of the foregoing facts staled above, we are of the opinion: that no question of law arises out of the order of the Tribunal and we, therefore, decline to refer the same to the High Court."

In the facts and circumstances of this case, in our opinion, the questions referred to above should be referred to this court for opinion. Accordingly, we direct the Tribunal to refer the said two questions u/s 256(2) for the opinion of this court.

The petition is disposed of.

In the facts and circumstances of the case, however, we make no order as to costs.