Commissioner of Income Tax vs Essa Ismail Sait

Varghese Kalliath, J.—This original petition is u/s 256(2) of the Income Tax Act, 1961, for directing the Income Tax Appellate Tribunal to state a case and refer the questions of law for the decision of this court. The questions set out are these :

" 1. Whether, on the facts and in the circumstances of the case, the order of the Tribunal is a judicial order ?

Whether, on the facts and in the circumstances of the case and in view of the alleged acceptance of a similar order, the Revenue is precluded from canvassing the correctness of the order of the Commissioner (Appeals) on merits ?

Whether, on the facts and in the circumstances of the case, the Tribunal had any material to come to the finding that the expenditure had been incurred wholly and exclusively for earning the income for the firm and whether, on the facts and in the circumstances of the case, the order of the Tribunal is vitiated and perverse for non-consideration of the case on merits ?"

The assessee and his brother are partners in a firm. For the assessment year 1975-76, the partners had maintained a joint establishment for the purpose of earning the share income from the firm and incurred an expenditure of Rs. 73,722 for that purpose. The assessee, in his return, claimed an amount of Rs. 36,861 being 50% of the total expenditure incurred, viz., Rs. 73,722.

The Income Tax Officer disallowed the claim. In appeal, the appellate authority allowed the claim. It was noted that, in regard to the other partner, the Income Tax Officer had modified the computation of the share income holding that the claim made was allowable against the share income earned by the assessee. From this, it is clear that the share income of the other partner of the firm for which expenditure has been incurred is an item which can be deducted.

The only question that has to be considered is whether the amount claimed is the share income. There is no serious dispute as regards that matter also. The order of the appellate authorities was confirmed by the Tribunal. The Tribunal pointed out that the contention of the Revenue that the nexus of the expenditure has not been established is without any merit. The application filed by the Revenue for reference was also rejected on the ground that the nexus in regard to one of the partners has been established and that fact has been known to the Tribunal, which is not disputed before the Tribunal, is sufficient for the Tribunal to hold that the nexus has been established. The Tribunal held so, since the admissible items of expenditure had been considered by the appellate authority by allowing a portion and that decision of the appellate authority in the case of the other partner had been accepted by the Department.

In these circumstances, we see that there is no merit in this case to direct a reference of the questions of law framed in this original petition. The questions, though apparently seem to be questions of law, are not really questions of law, but only questions of fact. In this view, the original petition is liable to be dismissed. We do so. It is also to be noted that this original petition is of the year 1982 and 10 years have already gone by and this matter relates to the assessment for the year 1975-76.