Commissioner of Income Tax vs Bharat Steel Tubes Ltd.

B.N. Kirpal, J.—This petition is in respect of the assessment year 1974-75. The petitioner had filed an application u/s 256(1) of the income tax Act. 1961 (''the Act'') before the Tribunal and sought reference of the following questions to this Court: 1. Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was correct both on facts and in law in confirming the view of the Commissioner of income tax (Appeals) that sole selling agency commission paid to Raunaq and Co. (P.) Ltd. was inadmissible business expenditure?

Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was correct both on facts and in law in holding that the method of valuation of work-in-progress adopted by the assessee was not unreasonable?

Whether, on the facts and in the circumstances of the case, the Income- tax Appellate Tribunal was correct both on facts and in law in holding that commission paid outside India and paid in clauses (i) and (ii) of section 35B(2)(b)(sic)?

Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was correct both on facts and in law in confirming the view of the Commissioner of income tax (Appeals) that since the addition made on account of perquisites in the case of one of the directors has been deleted in his personal case, the disallowance of Rs. 23,200 made by the income tax Officer u/s 40(c) cannot be sustained?

Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was correct both on facts and in law in confirming the deletion of addition of Rs. 2,16,25,470 made on account of ''on money''?

Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was correct both on facts and in law in confirming the deletion or addition of Rs. 53,070 on account of under-valuation of stock?

The Tribunal, while disposing of the application u/s 256(1), has referred only question No. 3 to this Court. The other questions have not been referred. It is in respect of those that the present application u/s 256(2) has been filed.

As far as the first question is concerned, we are in agreement with the finding of the Tribunal that the same is a question of fact. Furthermore, in earlier orders a similar view had been taken by the Tribunal on an application being filed u/s 256(1) and the application u/s 256(2), IT Case No. 24 of 1990, had been dismissed. We, therefore, are of the opinion that this is not a question of law.

Question No. 2 pertains to the method of valuation. The Tribunal has come to the conclusion that the method adopted by the assessee was not unreasonable. This is a pure finding of fact and no question of law arises.

Question No. 4 is also a question of fact. The addition in the hands of the directors having been deleted, it obviously means that the expenditure so incurred by the company was for the purpose of business of the company and therefore, was rightly allowed. No question of law therefore, arises.

It has been strongly contended by Mr. Gupta that question No. 5 is a question of law. We do not agree. The question is whether the company earned any ''on money'' as alleged or not. On the basis of evidence on record, the Tribunal has come to the conclusion that no such amount was earned by the company. This is a pure question of fact. We may here notice that, in the earlier assessment year 1972-73, a reference application u/s 256(1) had been filed by the department but the same was dismissed and, thereafter, no application u/s 256(2) was filed.

It is contended by Mr. Gupta that, in this case, the department has relied upon the books of account and statement of Surekha who has stated that the money was paid to the company. This is the evidence which has been dealt with by the Tribunal and the Tribunal has found as a fact that the story put forth by Surekha is not correct. No question of law arises.

As regards question No. 6, this depends upon question No. 5 because the case of the department was that because the assessee was charging ''on money'', it must have under-valued its stock. This was a pure surmise on the part of the department and the Tribunal rightly came to the conclusion that there was no question of law. This petition is, accordingly, dismissed. No order as to costs.