Commissioner of Income Tax vs J.K. Cotton Spg. Mills Co. Ltd.

R.K. Agrawal, J.—The Tribunal, Allahabad has referred the following three questions of law u/s 256(1) of the IT Act, 196l (hereinafter referred to as ''the Act''), for opinion to this Court :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the order of the learned CIT(A) that where WDV of the assets was not ascertainable, estimated value, i.e., 50 per cent of the sale price be substituted as WDV and the 50 per cent be treated as profits u/s 41(2) of the IT Act, 1961 ?

Whether, in law and in the circumstances of the case, the Tribunal was justified in upholding the order of the learned CIT(A) allowing the assessee''s claim of bonus in excess of 8.33 per cent amounting to Rs. 18,92,611 claimed on the basis of an agreement which took place on 16th June, 1980 which relates to the period relevant to the asst. yr. 1981-82, when the same was not quantified in the year under consideration and the provision for the same was also not made in the assessee''s accounts for the relevant year ?

Whether, on the facts and circumstances of the case, the Tribunal/was correct in law in holding that the retrenchment compensation of Rs. 580 paid to the worker of the electronic unit by the assessee, was allowable as business expenditure u/s 37(1) of the IT Act, 1961 and specifically when the electronic unit was in the process of being wound up ?

The reference relates to the asst. yr. 1980-81.

We have heard Sri Shambhu Chopra, learned standing counsel for the Revenue and Sri R.S. Agrawal, learned Counsel for the respondent-assessee.

It is agreed between the learned Counsel for the parties that the first question has been considered by this Court in IT Ref. No. 65 [sic-IT Ref. No. 66] of 1990 decided on 20th Jan., 2005 [reported as Commissioner of Income Tax Vs. J.K. Cotton Spinning and Weaving Mills Co. Ltd., ] which is inter panes and this Court has answered the similar question in favour of Revenue and against the assessee. It is also agreed between the counsel for the parties that the third question has been considered by this Court in IT Ref. No. 66 [sic-IT Ref. No. 65] of 1990 decided on 20th Jan., 2005 [reported as Commissioner of Income Tax Vs. J.K. Cotton Spinning and Weaving Mills Co. Ltd., ] and this Court has answered the similar question in favour of the assessee and against the Revenue. So far as the second question is concerned, a preliminary objection has been raised by Shri R.S. Agrawal that this question does not arise out of the order of Tribunal as the claim of bonus amounting to Rs. 1,89,261 has not been allowed by the Tribunal during the assessment year in question.

From the perusal of the order of the Tribunal we find that the Tribunal had not allowed the claim during the assessment year in question.

The findings recorded by the Tribunal are contained in para 7 of the order reproduced below :

We have considered the rival submissions and the materials brought on record. It is not in dispute that the assessee''s claim of Rs. 23,51,572 was accepted by the CIT(A) in his appellate order for the asst. yr. 1979-80 and that order was upheld by the Tribunal. That being so, the claim for that amount cannot be allowed this year as well. However, the controversy as to which year the claim should be considered had been considered by the Tribunal in its combined order in the assessee''s own case for the asst. yrs. 1977-78 and 1978-79 in ITA Nos. 2251 and 2423/AU/1983, dt. 2nd April, 1989, a copy of which has been brought on record. The Tribunal had upheld the action of the CIT(A) in respect of both assessment years. Respectfully following the order of the Tribunal mentioned above, we uphold the order of the CIT(A) for the year under consideration.

Since the Tribunal has not allowed the claim of bonus during the assessment year in question and on the other hand it has been allowed during the asst. yr. 1979-80, the question No. 2 does not arise out of the order of the Tribunal.

In view of the foregoing discussions we answer the first question in the negative, i.e., in favour of the Revenue and against the assessee and the third question in the affirmative, i.e., in favour of the assessee and against the Revenue. The question No. 2 is returned unanswered.

In view of the divided success the parties are directed to bear their own costs.