Lawyers Directory Listing
Chat with us free on WhatsApp — tell us your city and legal matter and our team connects you with the right lawyer. No form, no fee.
Miscellaneous Income-tax Reference No. 70 of 1959, decided on 18th March 1964.
Reference Powers of High Court
-No power to formulate new question and answer it-Indian Income-tax Act, 1922, S. 66 (1).
The High Court in exercise of its power of redrafting a question cannot substitute a question which was not sought to be referred in the application made under section 66 (1); it cannot answer a question which was not mentioned in the application under section 66 (1) itself.
By this application the assessee under section 66 (1) of the Income-tax Act required this Tribunal to refer to the High Court certain questions of law said to arise out of the Tribunal's order dated March 8, 1958. As, in our opinion, a question of law does arise out of the said order, we hereby draw up a statement of the case and refer the question of law mentioned below to the High Court of Judicature at Allahabad.
2. The statement of the case relates to the assessment year 1950-51, the relevant accounting period being the financial one ending March 31, 1950.
3. The assessee is a public limited company. The assessee's business consists of manufacture and sale of vegetable products. For the Bombay Branch, the assessee had taken a godown on rent for the purpose of their business on the term that the maintenance and repairs were to be borne by the assessee. During the accounting period the assessee had replaced the floor of the godown and also replaced its roofing by corrugated sheets and repaired the plant and machinery also, incurring a huge cost of Rs. 40,809. This item of expenditure also included the cost of some electric installations. Out of the total expenditure claimed for repairs the Income-tax Officer estimated Rs. 20,000 as capital expenditure pertaining to the building and disallowed that amount in the computation of the assessee's business income. After going through the details of the expenditure account the Appellate Assistant Commissioner also came to the conclusion that many of the expenses therein were in the nature of capital expenditure and on this ground justified the disallowance of Rs. 20,000. The order of the Income-tax Officer and the Appellate Assistant Commissioner are made parts of the case and are annexures "A" and "B".
4. Against this disallowance the assessee came up in appeal before the Appellate Tribunal. It was contended before the Tribunal that the assessee not being the owner of the building and having undertaken to bear the cost of repairs to the building, the whole account for such repairs should have been allowed under section 10 (2) (ii) of the Income-tax Act as current repairs, irrespective of any improvement to the building. After going through the analysis of the items of the repairs the Tribunal found that quite a large proportion of the items debited to repairs account related to complete re-roofing of the godown, cementing of the floor thereof and installation of fresh electric lines. The Tribunal was of the view that those expenses were of capital nature, as they brought into existence assets of an enduring nature. The Tribunal also concurred with the estimate of such capital expenditure. Holding that way the Tribunal confirmed the disallowance. The order of the Tribunal is made part of the case and is annexure "C".
5. On these facts we refer the following question of law for the opinion of their Lordships:
"Whether on the facts and in the circumstances and on a true interpretation of the provisions of clause (ii) of subsection (2) of section 10 of the Income-tax Act, the assessee was entitled to deduction for the expenses of a capital nature included in the cost of repairs to the premises of which he was a tenant "
6. In spite of service of notice neither the applicant nor its counsel was present. We have heard the departmental representative. The minor suggestions suggested by the departmental representative have been accepted and incorporated in the statement of the case. The statement is, therefore, finalised.
S. N. Varma for the Assessee.
R. L. Gulati for the Commissioner.
This is a statement of a case submitted under section 66 (1) at the assessee's instance by the Income-tax Appellate Tribunal requiring this Court to answer the following question:
"Whether on the facts and in the circumstances and on a true interpretation of the provisions of clause (ii) of subsection (2) of section 10 of the Income-tax Act, the assessee was entitled to deduction for the expenses of a capital nature included in the cost of repairs to the premises of which he was a tenant "
The statement shows that the assessee has taken a godown on rent for carrying on its business on condition that it will maintain and repair it. During the previous year relevant to the assessment year it cemented the floor of the godown, replaced its roof by corrugated sheets and replaced the electric wiring. It claimed the right to deduct the amounts spent on these three items when computing its income from the business. Its claim has been disallowed by the Tribunal on the ground that the expenditure was of a capital nature inasmuch as the so-called repairs brought into existence assets of an enduring nature. Then at its instance it submitted the statement of the case.
The deduction claimed by the assessee was under section 10 (2) (ii) of the Income-tax Act. The assessee is admittedly a tenant of the godown and has admittedly undertaken to bear the costs of its repairs. It is also not in dispute that it has spent the amounts claimed by it on the three items. It would be entitled to deduct the amounts under section 10 (2) (ii) if carrying out the works amounted to repairing the godown. The question referred by the Tribunal to this Court should have been whether carrying out the three items of works amounted to repairing the godown and not the question formulated by the Tribunal. The latter does not arise out of the statement of the case and this is conceded by Sri S. N. Varma and also by Sri Gulati.
It was suggested by Sri S. N. Varma that this Court should redraft the question but we are unable to redraft it because we do not know that the question formulated by the Tribunal was not the question that the assessee itself had wanted to be referred to this Court. This Court in exercise of its power of redrafting a question cannot substitute a question which was not sought to be referred in the application made under section 66 (1); it cannot answer a question which was not mentioned in the application under section 66 (1) itself. The application made by the assessee under section 66 (1) is not placed before us and we do not know what question it wanted to be referred to this Court and whether the question actually referred by the Tribunal was not one of them. If it was, we have no jurisdiction to amend it by substituting in its place a different question.
In the result we find that the question formulated by the Tribunal does not arise out of the statement of the case and return the reference unanswered. In the circumstances of the case we direct that the assessee shall pay to the Commissioner of Income-tax his costs of this reference, which we assess at Rs. 100. Counsel's fee is assessed at Rs. 200.
Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.
🔍 Find a Lawyer