Commissioner of Income Tax vs Nirmal Paper Mart

Sohani, J.—This is an application u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act").

The material facts giving rise to this application, briefly, are as follows ;

The assessee is a firm carrying on business in paper and other goods. A criminal case was instituted against the partners of the assessee-firm u/s 114 of the Defence of India Act. The accused pleaded guilty and the court imposed a fine of Rs. 28,000. For the assessment year 1976-77, the asses-see claimed deduction of the amount of Rs. 28,000 as business expenditure. This contention was not upheld by the Income Tax Officer. The assessee thereupon preferred an appeal before the Appellate Assistant Commissioner but the appeal was dismissed. In the second appeal preferred by the assessee, the Tribunal held that the sum of Rs. 28,000 was deductible in computing the income of the assessee. The Revenue thereupon filed an application before the Tribunal for making a reference but that application was rejected. Hence, the Revenue has filed this application.

Shri Mukati, learned counsel for the Revenue was heard. None appeared on behalf of the assessee though notice was issued. Shri Mukati, learned counsel, relied on the decision, Commissioner of Income Tax Vs. Malwa Vanaspati and Chemical Co. Ltd., . Having heard learned counsel for the Revenue, we are satisfied that the following question of law does arise out of the order passed by the Tribunal:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in disallowing the addition of Rs. 28,000 made by the Income Tax Officer as it represented fine imposed by the court for contravention of provisions of Defence of India Act ?"

The application is, therefore, allowed. The Tribunal is directed to state the case and to refer the aforesaid question of law to this court for its opinion. No order as to costs as none appeared on behalf of the assessee.