Commissioner of Income Tax vs Price Waterhouse

Ajit K. Sengupta, J.—In this reference u/s 256(1) of the Income Tax Act, 1961, for the assessment year 1985-86, the following question of law has been referred to this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the order of the Commissioner of Income Tax (Appeals) for modification of the order of the Assessing Officer in respect of the disallowance made u/s 37(3A) of the Income Tax Act, 1961, according to the correct interpretation of law ?"

The facts relating to this reference are that the Assessing Officer had excluded Rs. 2,56,286 on account of repairs, etc., of motor cars from the motor car expenses in calculating the disallowance u/s 37(3A) which amounted to Rs. 64,688.

At the time of passing the appellate order, the Commissioner of Income Tax (Appeals) enhanced the disallowance u/s 37(3A) of the Act. He directed the Assessing Officer to modify the assessment after making fresh calculation of actual disallowance u/s 37(3A) including Rs. 2,56,286.

On further appeal by the assessee against the order of the Commissioner of Income Tax (Appeals), the Tribunal had allowed the assessee''s appeal following certain judicial pronouncements. The Tribunal, following the decision of the Bombay High Court in the case of Commissioner of Income Tax Vs. Chase Bright Steel Ltd. (No. 1), held that the expenses covered by Sections 30 and 31 of the Act could not be disallowed u/s 37(3A) of the Act.

It is not in dispute that the question in this reference is concluded by the decision of this court in Income Tax Reference No. 124 of 1988 in the case of Commissioner of Income Tax Vs. Tungabhadra Industries Ltd., , in which judgment was delivered on November 28, 1991.

Following the said decision, we answer this question in this reference in the affirmative and in favour of the assessee.

There will be no order as to costs.

Nure Alam Chowdhury, J.

I agree.