Commissioner of Income Tax vs Electric Construction and Equipment Co. Ltd. (No. 3)

Leila Seth, J.—By this application u/s 256(2) of the Income Tax Act, the Commissioner of Income Tax is praying that the Tribunal be directed to state a case and refer the following two questions of law for the opinion of this court :

"(i) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that expenses incurred on account of tea, refreshments, lodging expenses, etc., under the head ''General charges'' are not of the nature of entertainment and thereby deleting the disallowance of Rs. 8,209 ?

(ii) Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that there was no underestimate of income for the purpose of levy of interest u/s 216 and thereby further holding that the assessed is not liable to be charged with interest u/s 216 ?"

The relevant assessment year is 1973-74.

Mr. Aggarwal concedes that, on the facts and circumstances of the case, question No. (i) is a question of law and direction should issue to the Tribunal. In any case, for the earlier assessment year 1972-73, the Tribunal itself has referred a similar question in Income Tax Reference No. 66 of 1980.

Consequently, we direct the Tribunal to draw up a statement of case and refer question No. (i) for the opinion of this court.

With regard to question No. (ii), it appears that the assessed estimated the advance tax liability as on June 13, 1972, at Rs. 5,25,000. Subsequently, on October 7, 1972, it estimated the advance tax liability at Rs. 7,50,000. The accounting year came to a close on October 31, 1972.

The Tribunal has found as a fact that there was no underestimation of advance tax.

In Commissioner of Income Tax Vs. Nagri Mills Ltd., , the Gujarat High Court held that no interest is chargeable u/s 216 as the Income Tax Officer had failed to record a finding that there had been an underestimate by the assessed and, consequently, no question of law arose.

In the present case, as abovementioned, the Tribunal came to a categorical finding that there is no underestimation. This is a finding of fact and, consequently, no question of law arises out of the order of the Tribunal.

We, Therefore, decline to direct the Tribunal to refer question No. (ii).

The application is partly allowed. However, in the circumstances of the case, we make no order as to costs.