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Income-tax Case No.54 of 1985, decided on 23rd April, 1987.

---S. 66--Reference--Allowance of salary and deletion of add backs--No interpretation of law involved--Decision of Income-tax Appellate Tribunal based upon appreciation of certain facts--Such decision, held, would not give rise to any question of law--Reference application rejected.

K. Salahuddin for Appellant.

M.G. Dastgir for Respondent.

Date of hearing: 15th April, 1987.

.--By this Reference Application under section 66 (2) of the repealed Income-Tax Act, 1922 (hereinafter called the Act); the Commissioner of Income-tax (Central Zone) Karachi, requested this Court to consider and decide some 7 questions of law allegedly arising out of the order dated 24-6-1974 passed by the Income-Tax Appellate Tribunal-(Fifth Bench) Karachi, in respect of the assessment year 1971-72 made against the respondent, M/s. Shakil Express Limited, Karachi.

2. Mr. Khalifa Salahuddin, learned counsel for the applicant, however, at the outset stated that he would press only the following two questions out of the 7 proposed questions:

(1) "Whether, the learned 'tribunal had any material to hold that the salary claims of Rs.30,000 at the Head Office and l1s.98,000 at Rawalpindi Office were improperly disallowed by the Income Tax Officer "

(2) "Whether, the learned Tribunal was justified in deleting the add backs of Rs.29,166 at the Head Office and Rs.17,368 at Rawalpindi office on account of bad debts under section 10 (2) (xi) when the Income Tax Officer had held that the debts were time-barred and this finding was not controverted by the learned Tribunal "

3. He also submitted that the, second above-noted question has not been properly framed and it would require to be reset by this Court.

4. We would, therefore, confine ourselves to' state briefly the facts of the case only in so far as they are relevant to the above-noted two questions.

5. The assessee-company is engaged in the business of travelling agent. It has its Head Office at Karachi and a Branch Office at Rawalpindi. It claimed expenses under the Head "Salary" in the profit and loss account in the sum of Rs.1,65,245 andRs.2,53,841 respectively, in the Head Office and the Rawalpindi Branch Office. The I.T.O. disallowed the sum of Rs.30,000 and Rs.98,000 respectively mainly on the ground of excessiveness and unverifiability as some of the employees could not be traced out. The Tribunal reversed this finding of the I.T.O. and directed the deletion of this add back with the following observations:-

"Matter has been considered. In view of the facts that the appellant claims to have maintained full details of salary payments and offers explanation for the lack of service of notices and attendance before the Income-tax Officer as being due to their having left the service, etc. the disallowance out of salaries out of two offices appear to be uncalled for. These will accordingly be deleted."

6. The facts pertaining to the question of disallowance of bad debts claimed in the Head Office and Rawalpindi Branch Office are these:

The assessee had claimed bad debts of Rs.29,166 and Rs.17,368 in the Head Office and Rawalpindi Branch Office Accounts respectively. The Income-Tax Officer disallowed both the entire claims primarily on the ground that effective steps for their recovery were not taken. On appeal, the Tribunal, after considering the contentions of the assessee counsel knocked of both the add backs. The Tribunal's finding in this behalf is extracted below:-

" - - - - - -We have considered the matter. As the appellant vehemently contends that all possible efforts have been made for the recovery of bad debts and it appears that they were genuinely incurred, we consider the disallowances out of this head in the two offices to be incorrect which will be deleted."

7. The department then moved the Income Tax Appellate Tribunal under section 66 (1) of the Act seeking reference of the 7 specified questions of law, which were said to arise out of the said questions of the Appellate Tribunal. The ITAT rejected the application by its order dated 19-12-1974 holding that all the questions sought to be referred to the High Court were the questions of fact and hence were not referable to High Court.

8. Aggrieved by the refusal of the Appellate Tribunal in referring the proposed alleged 7 questions of law the department has presented this application seeking the decision of this Court on the said questions. However, the learned counsel for the applicant, as stated above, restricted the scope of this application to the extent of the above-stated two questions.

9. From the above-narrated facts of the case as well as from the submissions of parties counsel made before us, it is manifestly clear that no question of law came up for determination before the Appellate Tribunal in respect of either of these two claims. The Tribunal allowed reliefs to the assessee on both counts upon appreciation the facts pertaining to both the claimed expenses. While striking the disallowance of Salaries the Appellate Tribunal, disagreeing with the findings of fact recorded by the ITO, held that the explanation tendered by the assessee in regard to the non-availability of the employee at the given address was satisfactory, more particularly when they had ceased to be the employees of the assessee. The other factor taken rote of by the Tribunal for allowing the relief was that the assessee had also maintained full details of the salaries paid to the staff. This observation too does not give rise to any question of law.

10. Similarly the deletion of the add backs made on account of bad debts was tendered by the Tribunal upon its satisfaction about the contention made on behalf of the assessee-respondents that all possible efforts had been made for their recovery, Even during submission of the counsel for the parties made before us it transpired that the amounts of debts were standing against quite large number of persons and the sums claimed were made up of small amounts say lesser than Rs.1,000 barring a few cases where the highest amount was in any case not more than Rs.2,500. It is thus obvious that the decision of the. Tribunal is based upon appreciation of certain facts and hence it does not give rise to any question of law.

11. Mr. Khalifa Salahuddin, learned counsel for the applicant, contended that the two proposed questions are questions of law and he, therefore, pressed that they should be answered by this Court.

12. We do not feel persuaded to accept his contention as correct. The Tribunal has rightly declined to refer them to this Court by the holding that the question as framed were questions of fact. The Trig final has, as already observed, allowed the claims under both the aforesaid heads in appreciation of facts, for cogent reasons and not by interpreting any provision of the Income Tax Act:

13. Having reached the above conclusion we do not consider it worthwhile to deal with the contention of the learned counsel for the respondent that the application is liable to be dismissed for violating the rule 1 of Chapter VII, Part 'B' of the High Court Rules.

14. For the foregoing reasons we agree with the Tribunal that none of the alleged questions of law as sought to be referred to the High Court are arising from its order dated 24-6-1974. The reference application is therefore, rejected.

M.B.A./C-20/ K Reference rejected.

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