1996 (7) TMI 114 - HC - Income Tax

Business Expenditure, Expenditure Incurred, Finding Of Fact, Question Of Fact, Question Of Law

Summary

Issues:
1. Disallowance of expenditure under rule 6B(3) of the Income-tax Rules.
2. Disallowance under section 37(3A) of the Income-tax Act.

Analysis:

Issue 1:
The first issue pertains to the disallowance of Rs. 37,820 under rule 6B(3) of the Income-tax Rules for presenting watches to dealers. The Income-tax Appellate Tribunal (the Tribunal) held that since the watches were not proven to be for advertisement purposes but for maintaining good relations with dealers, the disallowance was unjustified. The Tribunal's decision was based on factual findings and precedent from other High Courts. As the nature of the gifts was a factual determination, no legal question arose for the High Court's opinion. Therefore, the Tribunal's refusal to refer this issue was deemed appropriate.

Issue 2:
The second issue concerns the deletion of the disallowance under section 37(3A) of the Income-tax Act amounting to Rs. 6,451 for car maintenance expenses. The Tribunal overturned the disallowance based on a previous judgment in the assessee's favor for a different assessment year. The High Court upheld the Tribunal's decision, emphasizing that the matter involved factual findings rather than legal questions. The Tribunal's refusal to refer this issue was deemed valid, considering the absence of any legal query. Additionally, the tax effect being less than Rs. 30,000 further supported the Tribunal's decision not to refer the matter, aligning with the Board's circular.

In conclusion, the High Court found no legal questions warranting its opinion in the matter. The Tribunal's decisions were upheld as they were based on factual assessments, and the refusal to refer the issues was deemed appropriate. Therefore, the application under section 256(2) of the Income-tax Act was dismissed.