1996 (3) TMI 68 - HC - Income Tax

Summary

Issues:
1. Allowance of sales returns without established nexus
2. Treatment of expenditure for feasibility report as revenue expenditure
3. Allowability of bad debt claim for the relevant accounting period
4. Burden of proof regarding the year in which debts became bad
5. Justification of interest charged under section 217 and its deletion by the Tribunal

Analysis:

Issue 1:
The first issue pertains to the justification of allowing the claim of sales returns without establishing a nexus with the sale of scrap. The Tribunal held this to be a finding of fact and not a referable question of law. The Income-tax Officer disallowed the sales return amount as the assessee failed to provide evidence of its utilization. The Tribunal's decision was based on factual appreciation.

Issue 2:
Regarding the treatment of expenditure for a feasibility report as revenue expenditure, the Tribunal upheld its decision based on factual analysis and supported by relevant case law. The Assessing Officer had disallowed this claim, considering it a capital expenditure. The Tribunal's decision was in line with the decision in Indian Oxygen Ltd. v. CIT [1987] 164 ITR 466 (Cal).

Issue 3:
The third issue involves the allowability of a bad debt claim for the assessment year 1982-83. The Tribunal, after examining the facts, found certain bad debts claimed by the assessee to be allowable for that year. This decision was also based on factual appreciation and not considered a question of law.

Issue 4:
The Tribunal held that the burden of proof regarding the year in which the debts became bad was on the Department. This finding was based on factual examination and did not give rise to a referable question of law.

Issue 5:
The final issue concerns the justification of interest charged under section 217 and its deletion by the Tribunal. The Tribunal found this to be a finding of fact and not a question of law. The Tribunal's decision was upheld, stating that no perversity or illegality was demonstrated, and the orders were based on factual appreciation.

In conclusion, the High Court dismissed the application under section 256(2) of the Income-tax Act, holding it to be meritless and not making out a case for a direction to state a case. The Court found the Tribunal's orders to be correct, based on factual analysis and supported by relevant legal precedents. The application was dismissed without costs, and counsel fees were fixed for each side.