COMMISSIONER OF INCOME-TAX Vs. MICO LTD

JUDGEMENT

(1.) THE assessee company entered into an agreement with Ghaziabad Engineering Company Private Ltd., on 9-2-1977 to get some services rendered by them for which the assessee had to pay a consideration of Rs. 5,50,000/- per year. THE tenure of the contract was two years and fees had to be made in advance. THE first installment was payable on 19-2-1977 and the second, a year after. THEreafter deduction was claimed by the assessee relating to the second installment as it fell during the period of account. Disallowance was made in the assessment on the ground that there was No. supporting evidence proving performance of the contract by GEC. THE tribunal noticed on an earlier occasion this very issue and remitted the matter back to the commissioner for reconsideration. THE remand is for the reasons mentioned in detail in the order of the tribunal. THE tribunal did not accept the contention of the assessee. THE assessee claimed sum of Rs. 33,00,000/- being the installment payment made to GEC. GEC was the sole distributor for MICO products in certain states of North India and the distribution agreement was for a certain period. Since it was prematurely cancelled by the assessee, the assessee had to agree to pay compensation of Rs. 99,00,000/-payable in installments in triennium, but such installment was payable in the year of account. Assessee paid a compensation of Rs. 99,00,000/-and claimed deduction of the same in the assessment for the year 1970-79. THEre was dispute between the assessee and the revenue, not only with regard to allowability of the same for the year 1978-79 but also whether the expenditure could go into the revenue field. THE tribunal held that if Rs. 99,00,000/- is allowed as deduction in the assessment year 1978-79 then there could be no deduction in this year and if at all deduction is to be allowed, it would be of the sum of Rs. 33,00,000/- paid in this year. THE tribunal in the light of a reference Page 0837 application has chosen to refer the following questions of law in the light of the order passed in RA No. 198/Bang/1995, RA No. 213/bang/1995 and RA No. 214/Bang/1995. RA No. 198/Bang/1995; 1. Whether on the facts and in the circumstances of the case, the tribunal ought to have held that the expenditure of Rs. 5,50,000/- incurred by the applicant in respect of the amount paid to Ghaziabad Engineering Co. Pvt., Ltd., was deductible in computing the total income? 2.Whether the tribunal erred in not dealing with the alternative contention raised at the time of hearing that if it is held that the aforesaid amount was not for services to be rendered, it would be of the same nature as the sum of Rs. 99,00,000/- paid to GEC and as the same had been allowed, the above amount was also allowable? RA No. 213 & 214/Bang/1995 3. Whether on the facts and in the circumstances of the case, the appellate tribunal was right allowing depreciation at higher rates on roads and culverts, pipelines (in factory), storage tanks, and all in factory? 4. Whether on the facts and in the circumstances of the case, the appellate tribunal was right in law in allowing deduction under Section 40A(7) of the Act of a sum of Rs. 10.48 lakhs being the additional liability for gratuity in respect of this assessment year, even though the payment to the fund had been made in March, 1989 i.e., after a lapse of ten years from the end of the relevant previous year and in not following its own earlier order for the assessment year 1978-79 on this issue?

(2.) THE facts regarding the question suggested by the revenue in reference application in RA No. 213 & 214/1995 are as under;

(3.) SRI Seshachala, learned Counsel would support the order and he would say that the tribunal was justified in rejecting the case of the assesses in the absence of any acceptable material by way of evidence. He would say that the claim has to be based on evidence and it cannot be accepted without any evidence on record. He would rely on a couple of judgments.