Steel Tubes of India Limited vs Commissioner of Income Tax

G.G. Sohani, J.—By this application u/s 256(2) of the income tax Act, 1961 (hereinafter referred to as "the Act"), the applicant has prayed that the following questions of law be referred to this court for its opinion :

"(i) Whether, on the facts and in the circumstances of the case, the amount of Rs. 50,000 incurred towards garden expenses in the factory compound of the company are allowable as revenue expenditure in terms of Sub-section (1) of Section 37 of the Income Tax Act, 1961 ?

(ii) Whether, on the facts and in the circumstances of the case, the amount of Rs. 5,000 incurred towards garden expenses in the factory compound of the company forms part of the ''actual cost'' of an asset to the assessee for the purpose of grant of depreciation allowable u/s 32 of the Income Tax Act, 1961? "

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

The assessee filed its return for the assessment year 1976-77 claiming a sum of Rs. 86,023 as garden expenses. The applicant contended that the aforesaid expenditure was allowable as revenue expenditure as it was incurred for establishing a garden in the factory premises and was incurred wholly and exclusively for purposes of business of the applicant. The Income Tax Officer held that a sum of Rs. 50,000 out of the total expenditure of Rs. 86,023 amounted to capital expenditure. Aggrieved by the order passed by the Income Tax Officer, the applicant preferred an appeal before the Commissioner of Income Tax (Appeals), who confirmed the order passed by the Income Tax Officer. The second appeal preferred by the applicant before the Tribunal was also dismissed. An application submitted by the applicant u/s 256(1) of the Act for making a reference to this court was rejected. Hence, the assessee has filed this application.

Having heard learned counsel for the parties, we have come to the conclusion that the question as to whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure amounting to Rs. 50,000 incurred by the assessee towards garden expenses was not allowable under the provisions of Sub-section (1) of Section 37 of the Act, is a question of law which arises out of the order passed by the Tribunal.

As regards the second question, we are of the opinion that it does not arise out of the order passed by the Tribunal. Learned counsel for the applicant was unable to satisfy us that any such question, as is sought to be raised, was raised by the applicant before the Tribunal. It was contended by learned counsel for the applicant that it was the duty of the Income Tax Officer to grant statutory deduction u/s 32 of the Act. But the assessee in that case should have raised the question of admissibility of deduction u/s 32 of the Act before the Tribunal. No question having been raised by the assessee in that behalf before the Tribunal, it cannot be held that that question arises out of the order passed by the Tribunal.

For all these reasons, this application is partly allowed. The Income Tax Appellate Tribunal, Indore Bench, is directed to state the case and refer the following question of law to this court for its opinion :

" Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure amounting to Rs. 50,000 incurred by the assessee in the assessment year 1976-77 towards garden expenses, was allowable as deduction under the provisions of Sub-section (1) of Section 37 of the Income Tax Act, 1961 ? "

In the circumstances of the case, parties shall bear their own costs of this application.