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Judgment
Suhas Chandra Sen, J. - Two questions of law have been referred to by the Tribunal under s. 256(1) of the IT Act :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to relief under s. 84 in respect of the asst. yrs. 1963-64, 1965-66, 1966-67 and 1967-68 ?
Whether, the Tribunal was right in holding that the sum of Rs. 3,58,000 could be regarded as revenue expenditure to be deducted in computing income, profits and gains of the assessee during the accounting year relevant to the asst. yr. 1966-67 ?"
So far as the first question is concerned the facts are not in dispute. The assessee claimed relief under s. 84 of the IT Act, 1961 in respect of Glass Bulb Blowing Unit, Gaseous Lamp Unit and Miniature Prefocus Lamp. The ITO rejected the claim of the assessee for the first year under reference by a short order stating that Glass Bulb Blowing Unit, Gaseous Lamp Unit and Miniature Prefocus Lamp Unit were in fact extension of the existing industrial undertaking involving the installation of a few machineries, and could not be called newly established undertakings within the meaning of s. 84 of the IT Act, 1961 in respect of Glass Bulb Blowing Unit, Gasous Lamp Unit and Miniature Prefocus Lamp Unit.
We are concerned in this reference with the asst. yrs. 1963-64, 1965-66, 1966-67 and 1967-68 for which the relevant previous years ended on 30-6-1962, 30-6-1964, 30-6-1965 and 30-6-1966 respectively. It is of interest to note that in the assessment for the asst. yr. 1963-64, the ITO after local inspection allowed the claim of the assessee under s. 84 of the IT Act. The ITO who passed the assessment orders for the subsequent years differed from the view taken by his predecessor in office.
The matter ultimately went to the Tribunal. The Tribunal held that the new units were "newly established industrial undertakings" within the meaning of s. 84 of the IT Act, 1961 and as such were entitled to the relief claimed. The Tribunal referred to a circular issued by the CBR under s. 15C which corresponds s. 84 of the IT Act, 1961, in which it was clarified, inter alia. -
"In order to be entitled to the concession is not necessary that a separate company should be formed to operate the new undertaking. At the same time it is very difficult to give in general term a precise and exhaustive definition which could apply to all cases and in all conceivable circumstances. The question is largely one of degree and will have to be decided after consideration of the facts of each particular case."
The Tribunal has held that having regard to the size of the business of the assessee there has been a substantial increase in its total output. The Tribunal has noted that the paid-up capital of the company was increased to Rs. 35 lakhs from Rs. 10 lakhs. A large number of facts were also taken into account by the Tribunal :
(a) Govt. of India, the Commerce & Industry Ministry have granted special licences to establish these new undertakings;
(b) Govt. of India, the Chief Controller of Imports & Exports have granted capital goods licences for importing new machineries for these new undertakings;
(c) The complete machinery for these projects were all imported; local expenses were duty and installation;
(d) Govt. of India had approved separate technical service charge agreements for these new undertakings payable to the technical collaborators;
(e) remittances for technical service charge for these new undertakings were approved by the Reserve Bank of India;
(f) the units were located in distinct separate areas in the Lamp Factory Building;
(g) each of these new undertakings were worked with power and with more than ten persons;
(h) the workers and management of the units were separate and distinct from one another;
(i) separate records and stock, goods consumption, production and sales, wages and salaries and plant and machinery were maintained;
(j) technical service charges had been computed on such proforma, Profits & Loss Accounts (cost of production) and remittances had been approved by the Revenue Bank of India;
(k) the then ITO inspected the factory relating to asst. yr. 1962-63 and after duly satisfying himself allowed the claim for relief under s. 84 for Miniature Prefocus Lamp being now undertaking for that year."
It cannot be said that these factors are irrelevant or extraneous for the purpose of the question before the Tribunal. There can not be any question of perversity and in fact no such question has been raised. There is no legal infirmity in the order of the Tribunal. In our opinion, having regard to the facts and circumstances of the case, the Tribunals order must be upheld on the first question.
The second question does not pose any difficulty. After the statutory liability to a pay bonus arose, the assessee-company made a provision in its account for payment of bonus. The existence of the liability is not disputed. If an amount is not apart for discharge of the liability on actuarial valuation, that has to be allowed as deduction. The principles of law are well settled.
In view of the aforesaid, the second question will be answered in favour of assessee.
In the facts and circumstances of the case, therefore, both the questions will be answered in the affirmative and in favour of the assessee. There will be no order as to costs.
Satish Chandra, C.J. - I agree.