1997 (10) TMI 9 - HC - Income Tax

Summary

Issues:
- Application under section 256(2) of the Income-tax Act, 1961 seeking mandamus to the Income-tax Appellate Tribunal for drawing up a statement of case and referring questions of law to the High Court.
- Allowance of depreciation on assets despite non-use for business purposes.
- Interpretation of delivery of movable property in a lease transaction.

Analysis:
The High Court addressed an application under section 256(2) of the Income-tax Act, 1961, where the Revenue sought mandamus to the Income-tax Appellate Tribunal for referring questions of law to the High Court. The questions in contention were related to the allowance of depreciation on assets like trucks, gas cylinders, and machines despite non-use for business purposes during the relevant assessment year. The Tribunal had found that the assessee's business involved leasing out these assets, and the Revenue contended that the transactions were colorable and not genuine leases.

The High Court examined the questions proposed by the Revenue and found them to be inadequate in reflecting the actual contentions put forth. The first question raised by the Revenue focused on whether the assets were used by the lessee, which was not directly relevant to the finding that the assets were used by the lessor for the business of leasing. Similarly, the second question related to the ownership transfer of gas cylinders without simultaneous physical possession transfer, which was not the crux of the matter before the Tribunal.

The Court emphasized that it could reframe questions to bring out the real legal issues arising from the Tribunal's order but could not introduce entirely new questions that were not raised before the Tribunal. Citing legal precedents, the Court highlighted the limitations on its jurisdiction under section 256(2) of the Act, including reframing questions but not creating new ones. The Court concluded that the questions for reference did not arise from the facts found by the Tribunal, and as such, the Tribunal's decision to reject the application under section 256(1) was upheld.

In light of the above analysis, the High Court rejected the petition, emphasizing that the questions for reference did not align with the facts and circumstances found by the Tribunal. The decision was made without any order as to costs, maintaining the integrity of the Tribunal's findings and the limitations on the High Court's jurisdiction in framing questions of law for reference.