Delhi High Court
Commissioner Of Income-Tax vs Mohta Electrosteel Ltd. (And Vice ... on 8 March, 1995
Equivalent citations: [1995]215ITR522(DELHI)
Author: D.P. Wadhwa
Bench: D.P. Wadhwa
JUDGMENT
Dr. M.K. Sharma J.
1. As the two applications filed under section 256(2) of the Income-tax Act, 1961, by the Revenue and the assessee, respectively, arise out of the same assessment year, namely, 1983-84, and also from the same facts, we propose to dispose of the two applications by this common judgment and other.
2. Both the applications relate to the assessment year 1983-84.
3. In the application filed by the Revenue under section 256(2) of the Income-tax Act, the following questions said to be questions of law are sought to be referred to this court for its opinion :
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the liability of Rs. 10,94,326 on account of surcharge on the electricity consumed was a statutory liability and was an allowable deduction even though it was disputed ?
2. Whether the Income-tax Appellate Tribunal had any material to hold that the monthly bills which included the disputed charges were presented to the assessee in all the earlier months and the entire amount of Rs. 10,94,326 claimed as a deduction pertained to the accounting year relevant to the assessment year 1983-84 and that this liability had accrued during the year ?
3. Whether, on the facts and in the circumstances of the case, the order of the Income-tax Appellate Tribunal that both annealing and pickling was done for consignments where the time taken as recorded in challan, was less than 50 minutes is legally correct and based on any evidence, when in the demonstration run of the machinery, the minimum time for these activities was recorded as 50 minutes per metric ton ?
4. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the assessee was entitled to the deduction for pickling and annealing charges at Rs. 1,250 per metric ton in respect of all the consignments sent to HSP ?"
4. The brief facts common to both the applications are that the assessee-company was engaged in the manufacture of steel strips and box strips. It also does job work of annealing and pickling as well as rolling. A claim of Rs. 10,94,326 of the assessee on account of surcharge in respect of electricity consumed was disallowed by the Assessing Officer. On appeal by the assessee, the Commissioner of Income-tax (Appeals) confirmed the disallowance whereas on a further appeal by the assessee, the Tribunal allowed the claim of the assessee holding that the liability in question was a statutory one and not contractual and that the liability relates to the account year and arose during the year.
5. On the other hand, the assessee claimed to have paid to Haryana Steel Products about Rs. 20 lakhs for annealing and pickling. This account was debited under the head "Salaries and wages". The Assessing Officer found that Haryana Steel Products was a proprietary concern of a family trust of Shri M. K. Mohta, a director of the company, and that the trust has been created for the benefit of the wife, children and grandchildren of Shri M. K. Mohta. The Assessing Officer considered the payment of Rs. 2,500 per metric ton paid to Haryana Steel Products as excessive and unreasonable and, accordingly, the rate of Rs. 600 as a reasonable rate. The assessee, being aggrieved, appealed to the Commissioner of Income-tax (Appeals) who after consideration of the claim of the assessee found that Rs. 2,500 as excessive and held Rs. 1,250 per metric ton as reasonable. Against the aforesaid findings of the Commissioner of Income-tax (Appeals), both the assessee and the Revenue came on appeal before the Tribunal. Considering the facts and circumstances of the case, the Tribunal upheld Rs. 1,250 per metric ton as reasonable. The Tribunal also considered as to whether the provisions of section 40A(2) are attracted in this case or not and on consideration of the same came to a finding that the payment was made to a trust called Krishna Mohta Kosh. The settlor of the trust was found to be Yagya Bhu and the beneficiaries included children of the settlor and the wife, grandchildren of Mr. M. K. Mohta and their spouses and Shri M. K. Mohta was found to be one of the directors of the company and, accordingly, the Tribunal held that as the payment to Haryana Steel Products was found to be to the trust where the beneficiaries are relations of the director, the provisions of section 40A(2) were applicable.
6. The Revenue being aggrieved by the order of the Tribunal in Income-tax Appeal No. 1067/(Delhi) of 1988, filed an application before the Tribunal under section 256(1) of the Income-tax Act, 1961, for referring the aforesaid four questions arising out of the assessment year 1983-84 for the opinion of this court, which after due consideration by the Tribunal was rejected holding the aforesaid questions as questions of fact. Accordingly, this application has been preferred by the Revenue.
7. We have heard learned counsel for the Revenue as also learned counsel for the assessee.
8. It is contended by learned counsel for the Revenue that all the four questions sought to be raised in this application are questions of law and that the Tribunal was wrong in coming to the contrary conclusion. We have been taken through the contents of questions Nos. 1 and 2 and on perusal of the same, we find that the finding recorded by the Tribunal to the effect that electric surcharge is a statutory liability is by now a settled issue.
9. Learned counsel appearing for the Revenue also could not dispute about the correctness of the aforesaid findings. In that view of the matter, in our opinion, the answer of the said question would be merely academic and self-evident and no useful purpose would be served by calling for a reference on those questions which are also based on findings of fact.
10. We, therefore, decline to call for reference on the aforesaid two questions.
11. With regard to the other two questions, namely, questions Nos. 3 and 4, in our opinion, they are covered by the decisions of this court in the case of CIT v. Northern India Iron and Steel Co. Ltd. [1989] 179 ITR 599 and also in Income-tax Case No. 139 of 1992, CIT v. Mohta Electro Steel Ltd., decided on September 28, 1994, and in Income-tax Case No. 86 of 1993-CIT v. Mohta Electro Steel Ltd. decided on December 13, 1994.
12. Accordingly, therefore in our opinion, no question of law arises out of questions Nos. 3 and 4 also and, therefore, we decline to call for reference on the aforesaid two questions as well.
13. In the result, the application filed by the Revenue stands dismissed.
14. Now, coming to the application filed by the assessee under section 256(2) of the Income-tax Act, 1961, in respect of the assessment year 1983-84, the assessee seeks to refer for the opinion of this court, the following seven questions as questions of law.
15. While issuing notice by this court on August 6, 1992, on the aforesaid application filed by the assessee questions Nos. 2 to 7 were held to be questions of fact and notice was issued by this court to the respondents restricted only to question No. 1. Therefore, in the present application, we have only to consider as to whether question No. 1 as set out in the application filed by the assessee, is a question of law and whether the said question is fit to be referred to this court for its opinion. We set out the said question hereunder :
"1. Whether, on the facts and in the circumstances of the case, the tribunal erred in law in holding that the provisions of section 40A(2) were attracted ?"
16. We have heard learned counsel for the assessee as also learned counsel for the Revenue.
17. It is contended by learned counsel for the assessee that the question of law sought to be raised is a question of law and the Tribunal was wrong in not referring the same to this court for its opinion. Learned counsel appearing for the Revenue during the course of his arguments relied upon the decision of the apex court in the case of Upper India Publishing House P. Ltd. v. CIT [1979] 117 ITR 569 and also the decision of this court in CIT v. Northern India Iron and Steel Co. Ltd. [1989] 179 ITR 599. The dispute sought to be raised by the assessee in the present petition appears to be covered by the ratio of the aforesaid two decisions. We are of the opinion that no question of law arises out of question No. 1 and, therefore, the Tribunal was right in coming to the conclusion that no question of law has arisen there from. Under the aforesaid circumstances, the application filed by the assessee also stands dismissed.