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TMI Blog1984 (3) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... , tea and refreshments to clients. 2. We heard the parties. At the hearing, reference was made to the provisions of Explanation 2 inserted with retrospective effect from 1-4-1976 by the Finance Act, 1983, according to which for the purpose of section 37(2A), 'entertainment expenditure' would include expenditure on hospitality of every kind, including provision of food or beverages to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade, but does not include expenditure on food or beverages provided by the assessee to his employees in office, factory or other place of their work. In view of the above amended provision, only the expenditure to the extent incurred to the employees in office, factory or any other place of work would be excluded from the scope of the term 'entertainment expenditure'. In the absence of factual details on this point, we would direct the ITO to ascertain the factual position and disallow the expenditure to the extent, if any, required under section 37(2A) read with Explanation 2. 3. The assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Exchange adjustment on account of exports 42,198 (v) Commission on export sales 1,57,725 ----------------- 2,14,542 ----------------- The Commissioner (Appeals) held that the assessee was entitled to weighted deduction only in respect of items (i) and (iii) (Rs. 2,500 and Rs. 4,662) on which the relief comes to Rs. 3,581. 6. We have heard the parties. Regarding item (ii) (bank charges), this relates to collection of the sale price, which is not an expenditure falling within any of the sub-clauses of section 35B(1)(b). Similar is the position regarding item (iv) (exchange adjustment on account of exports). Regarding item (v) (commission on export sales) it was stated to be to Ambadi Enterprises. Regarding this item our attention was drawn to the recent Madras High Court decision in CIT v. Southern Sea Foods (P.) Ltd. [1983] 140 ITR 855. The High Court while disallowing the assessee's claim in that case, has laid down the guidelines to be applied regarding the admissibility or otherwise of weighted deduction regarding commission payment. Having regard to the above decision, we would vacate the Commissioner (Appeals)'s and the ITO's order on this point and restore the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as capital expenditure. 11. The assessee's last contention is that the Commissioner (Appeals) erred in upholding the ITO's order computing the capital employed for the purpose of section 80J of the Act by deducting borrowed capital. The ITO had determined the capital under section 80J after deducting the liabilities, since the Madras High Court decision in Madras Industrial Linings Ltd. v. ITO [1977] 110 ITR 256 on this point in favour of the assessee had not been accepted by the department and was pending before the Supreme Court. The Commissioner (Appeals) rejected the assessee's plea that the liability was from the branch office to the head office of the assessee and it could not be deducted under rule 19A(3) of the Income-tax Rules, 1962 ('the Rules'). Before us in appeal, the assessee relied on the Madras High Court decision in Madras Industrial Linings Ltd.'s case, whereas the departmental representative urged that section 80J has been amended with retrospective effect from 1-4-1972 by the Finance (No. 2) Act, 1980, according to which, liabilities should be deducted. The departmental representative in this behalf referred to CIT v. K.N. Oil Industries [1982] 134 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f claim under section 80J after the pronouncement of decision by the Supreme Court on the vires of the retrospective amendment, was approved. When that was so and more particularly, when a stay had been granted in the assessee's own case, the Commissioner (Appeals). should not have approved of the method of computation of relief adopted by the Income-tax Officer. At the time of hearing of this matter, our attention has been invited to a decision of the Kerala High Court in the case of Traco Cable Co. Ltd. v. CIT [1982] 138 ITR 385 and that of the Madhya Pradesh High Court in the case of CIT v. Sanghi Beverages (P.) Ltd. [1982] 134 ITR 623 where both the High Courts held that for the purpose of granting relief under section 80J, only the amended law should be applied. But, neither before the Kerala High Court nor before the Madhya Pradesh High Court, question was posed as in the case before the Gujarat High Court. The claim of the department is that in view of the decision of the Kerala High Court, the Income-tax Officer was justified in applying the amended law. But that is beside the point. The point is what is the effect of the stay order granted by the Madras High Court and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unfair exercise of discretion in the disposal of cases which may amount to an abuse of discretion and even an abuse of the due process of law. It is ill this context that the Tribunal had evolved the method of restoring the appeals to the lower appellate authorities for awaiting the decision of the Supreme Court in the interests of justice and to avoid procedural injustice and loss of public time and money, which has also received the approval of the Gujarat High Court. We are also of the considered view that the Central Board of Direct Taxes should have seen this case as a fit one for interference by way of general instructions only to avoid litigation, waste of public money and time. We are, therefore, of the opinion that in the facts and circumstances of the case the Income-tax Officer should not have deducted the liabilities and computed the relief under section 80J. We, therefore, vacate his finding and restore the assessments to his file with a direction that he should keep the matter pending till the decision of the Supreme Court or Madras High Court, whichever is earlier." We would direct likewise and restore the issue regarding section 80J to the ITO for fresh decision, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earlier decision of the Tribunal in the case of Sundaram Fastners Ltd., the Tribunal would be justified in vacating the findings of the Commissioner (Appeals) and the Income-tax Officer regarding the computation of the deduction under section 80J of the Income-tax Act, 1961,--and restoring the matter to the Income-tax Officer for recomputation of the profit after the decision of the Supreme Court or the Madras High Court, regarding the retrospectivity of the amended section 80J [as amended by section 17 of the Finance (No. 2) Act, 1980] becomes available ? " 2. The point of difference was very clearly worded and the difference of opinion between my learned brothers is whether the decision of the Tribunal in the case of Sundaram Fastners Ltd. should be followed and that the order passed by the Commissioner (Appeals) should be vacated and that the ITO should be directed to recompute the capital base after the decision of the Supreme Court or the Madras High Court regarding the validity of the retrospective amendment to section 80J as amended by section 17 of the Finance (No. 2) Act, 1980. 3. Normally, there should not have been a difference of opinion in such a case, because it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single judge takes a view different from the one taken by another judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division Bench differs from the view taken by another Division Bench it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiorri with regard to a question of fact. If the Tribunal wants to take an opinion different from the one taken by an earlier Bench, it should place the matter before the President of the Tribunal so that he could have the case referred to a Full Bench of the Tribunal consisting of three or more members for which there is provision in the Income-tax Act itself." I may also add that on an earlier occasion, the Madras High Court had to make the following observation in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly, agree with the view expressed by the learned Accountant Member that the view expressed by the earlier Bench in the case of Sundaram Fastners Ltd., should be followed for vacating the findings of the Commissioner (Appeals) and restoring the matter to the ITO regarding the computation of the deduction under section 80J awaiting the final outcome of the decision of the Supreme Court or the Madras High Court, as the case may be, regarding the retrospectivity of the amended section 80J. 6. The learned departmental representative argued before me that he has nothing to urge other than referring me to the decisions of the High Courts, in the cases of Traco Cable Co. Ltd., K. N. Oil Industries and CIT v. Toshiba Anand Lamps Ltd. [1984] 145 ITR 563 (Ker.). in view of the fact that the point of difference referred to me is confined to whether the order of the Tribunal in the case of Sundaram Fastners Ltd., should be relied upon or not, I am afraid, I will not be able to go into the decisions cited by the learned departmental representative before me, as that would mean going into merits, which is not the point of difference referred to me. 7. The matter will now go before t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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