Silver Plastochem (P.) Ltd. vs Commissioner of Income Tax

S.K. Desai, J.—In this matter, we had issued rule. In the application, the assessee seeks reference of the following three questions : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in rejecting the assessee-company''s claim for weighted deduction u/s 35B of the income tax Act, 1961, on telephone (local) silver melting charges, brokerage and commission, bank charges, interest, clearing charges, subscription, salary to directors, when all the material to allow weighted deduction u/s 35B was on record before the income tax Officer ?

Whether, on the facts and in the circum stances of the case, the Tribunal was right in not admitting the additional ground raised for allowing weighted deduction u/s 35B on certain expenses incurred for the promotion of export and are covered u/s 35B(1)(viii) ?

Whether, on the facts and in the circum stances of the case, the Tribunal was right in holding that the AAC has erred in admitting additional ground for weighted deduction u/s 35B, when all the material to allow weighted deduction u/s 35B was on record before the ITO to consider whether the particular expenditure is allowable or not ?"

It would appear that the assessee had not claimed relief u/s 35B of the income tax Act, 1961 (''the Act''), on certain items before the ITO initially. However, when the matter went before the AAC, relief was claimed and allowed by the AAC. Aggrieved by the allowance, the department, inter alia, went in appeal to the Tribunal and contended that the AAC should not have allowed relief u/s 35B on the said four items. These are indicated in paragraph 5 of the appellate order of the Tribunal (Exhibit ''F). Two arguments were urged before the Tribunal, the first was that allowance u/s 35B could not be given on the said items and reliance was placed on the decision of the Special Bench in the case of J. Ramchand & Co. [IT Appeal No. 3255 (Bom.) of 1976]. This plea was sought to be met by the arguments urged on behalf of the assessee. However, the Tribunal found it unnecessary to go into the merits of the allowance, since it was of the opinion that the AAC was not justified in admitting additional ground relating to the claim for relief u/s 35B.

It was contended before us, on the earlier occasion, that the material for allowing the claim u/s 35B was already on record before the ITO. Mr. Dhanuka prepared copies of the material from the file and from that material, it would appear to us that only two of the items were reflected in the profits and loss account. Mr. Dhanuka tried to urge further that it was not enough that only some cursory reference to the two items (out of four, being item Nos. 2 and 3 only) should find a mention in the profit and loss account. According to his submission and there is some force also in that submission, greater details would be required and it was contended that, on merits, the assessee was not entitled to the claim u/s 35B.

On the previous occasion, we found the frame of the questions totally unsatisfactory and, according to us, the reference application in respect of the three questions, as framed, was required to be rejected. The matter was kept back for reframing the questions restricted to two items only. Today, however, submissions have been made that the questions, as generally framed, may be called for by the High Court.

The High Court, in our opinion, is not required to give its general analysis of the Supreme Court decision in Addl. CIT v. Gurjargravures (P.) Ltd. [1978] 111 1TR 1 , as analyzed, interpreted and applied in the Andhra Pradesh High Court decision in Commissioner of Income Tax Vs. Gangappa Cables Ltd., . Even after considering the Andhra Pradesh High Court decision and tentatively holding that it might be enough if some material pertaining to the new ground were on record, we are of the opinion that in respect of the questions as framed generally, bearing in mind the four items indicated in paragraph 5 of the appellate order of the Tribunal, there was no material on record, in respect of all the items although as we have said earlier, there was some material, whether enough or not, we do not wish to express any opinion in respect of two of the said four items. As the assessee has indicated his desire to have a general reference only and not limited to two items, we think the appropriate order to be passed in the application would be to discharge the rule. Order, accordingly. Parties to bear their own costs of the application.