1988 (6) TMI 5 - HC - Income Tax

Summary

Issues Involved:
The judgment involves two main issues:
1. Whether the Tribunal ignored relevant materials and relied on irrelevant materials in holding that the assessee had followed a regular method of accounting for certain expenses.
2. Whether the expenses not actually incurred during the relevant year should be allowed as deductions in computing the profits and gains of the business assessable for that year.

Issue 1 - Relevant Details:
The Commissioner of Income-tax, West Bengal-III raised questions u/s 256(2) of the Income-tax Act, 1961 regarding the method of accounting for expenses related to fire protection and stowing for the assessment year 1969-70. The Income-tax Officer disallowed the expenses, stating they were not referable to business expenditure. The Appellate Assistant Commissioner allowed the entire expenditure as revenue expenditure. The Tribunal found that only a portion of the expenses should be allowed based on the rules and directed the Income-tax Officer to determine the reimbursable amount according to the rules.

Issue 2 - Relevant Details:
The Revenue contended that the allowed expenses did not pertain to the relevant year for assessment. The assessee argued that the actual expenditure was not disputed and the disallowance was based on reimbursement not being cent per cent. The Tribunal found that the assessee consistently followed a method of accounting for expenses and reimbursement from the Coal Board, as per the relevant rules. The Tribunal allowed the expenses to the extent determined by them, considering the systematic method followed by the assessee.

Conclusion:
The High Court held that the Tribunal did not rely on irrelevant material and answered the first question in the negative. Consequently, the second question did not require an answer. The Court agreed with the Tribunal's decision to allow the expenses based on the systematic method followed by the assessee. The judgment concluded that the expenses should be allowed as deductions in computing the profits and gains of the business for the assessment year in question.