General Electric Co. of India Ltd. vs Commissioner of Income Tax

Sen, J.—The Tribunal has referred the following questions of law to this Court u/s 256(2) of the income tax Act, 1961 (''the Act'') :

1.Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in disallowing the applicant''s claim of Rs. 4,73,713 on account of advances written off during the year under appeal ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in ignoring the fact that the above sum of Rs. 4,73,713 represented the accumulated balance due from Industrial Air Control (India) Ltd., Poona as on 31st March, 1974 on account of advances made to that company from time to time and was completely irrecoverable ?

Whether finding of the Tribunal was perverse as it was based on an incorrect assumption that the applicant had issued a credit note for Rs. 8,114 against the party''s bills in March 1975, though in fact such a credit note was actually issued in March 1974 before finalising all the adjustments relating to the party''s accounts ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in disallowing the cost audit fees of Rs. 13,000 ?

In this case the assessment year involved is 1974-75 for which the accounting period is the year ended on 31-3-1974. The questions, whether a debt is a bad debt or not and in which year it became bad are all essential questions of fact that have been settled by the various decisions of the Privy Council and also Supreme Court. A reference can be made to the case of Bank of Bihar Ltd., Patna Vs. Commissioner of Income Tax, Bhiar and Orissa, where it is also well-settled that onus lies on the assessee to prove that a debt or a portion of it has become irrecoverable in the accounting year.

The facts stated by the Tribunal in the statement of case are as under:

The ITO did not allow the deduction on account of the advance written off on the ground that no legal action was taken for recovery. The Commissioner (Appeals) confirmed the disallowance on the ground that the assessee had issued a credit note to the IAC against the party''s bills in March 1975 for Rs. 8,114. The Commissioner (Appeals) held that since the assessee issued the credit note in March 1975, corresponding to the assessment year 1975-76, the question of allowing the deduction during the assessment year 1974-75 could not arise. The assessee before the Tribunal contended that the credit note for Rs. 8,114 against the party''s bill was issued by the assessee in March 1974 before finalising all the adjustments relating to the party''s account and not in March 1975 as was stated by the Commissioner (Appeals). The Tribunal, however, confirmed the finding of the Commissioner (Appeals) on the ground that there was nothing before them to infer that the credit note was issued in March 1974 and not in March 1975. The assessee made a provision for Rs. 13,000 on account of cost audit fees, as the cost accounts of the assessee were to be audited by a qualified auditor under the provisions of the Companies Act, 1956. The ITO disallowed the provision on the ground that a copy of the report was not available in the year ended on 31-3-1974. The Commissioner (Appeals) confirmed the disallowance on the basis that the actual payment of audit fees was made in September 1974 and the report of cost audit was received in the subsequent year. The Tribunal upheld the view of the Commissioner (Appeals).

So far as the first three questions are concerned, the Tribunal has considered all aspects of the matter and has taken notice of the credit note. The Tribunal has also considered the assessee''s argument in respect of the credit note and has given its finding on the analysis of facts. We see no reason to disturb the finding of facts made by the Tribunal and fail to see how the Tribunal''s decision was perverse and was passed upon any irrelevant consideration. The Tribunal has not ignored any relevant material produced before it.

The last question relates to disallowance of cost of audit fees of Rs. 13,000. The Tribunal has pointed out that this was done on the basis of actual payment of audit fees made in September 1974. The report of cost audit had already been received in the subsequent year.

We fell to see how this finding can also be disturbed. In view of the aforesaid, question No. 1 is answered in the negative and in favour of the revenue; question No. 2 is also answered in the negative and in favour of the revenue. So far as question No. 3 is concerned, the same is answered in the negative and in favour of the revenue. Question No. 4 is also answered in the affirmative and in favour of the revenue. There will be no order as to costs.

Banerjee, J.

I agree.