COMMISSIONER OF INCOME TAX Vs. B R CHAWLA

JUDGEMENT

(1.) PURSUANT to directions given by this Court under S. 256(2) of the INCOME TAX ACT, 1961 (for short the 'Act'), following question has been referred at the instance of the Revenue, by the Appellate Tribunal, Delhi Bench 'C' (in short the 'Tribunal'), for opinion of this Court :

(2.) FACTUAL position in nutshell is as follows. Assessee is an individual who was carrying on business under the name and style of M/s Baldev Raj & Sons. Previously M/s Baldev Raj & sons was the name and style of a partnership firm of which M/s Lal Chand, Kidar Nath, Madho Ram, Bishamber Prashad and B.S. Chawla were the partners. Assessee was the successor to the business which was being carried on by the said firm. Said firm was required to pay certain additional licence -fees imposed by the excise department during the asst. yr.1968 -69. Subsequently a part of the duty was refunded by the excise department out of which Rs. 18,255 were received by the assessee being the successor of the partnership -firm. Assessee took the stand that assessment of the firm which had paid the additional fees was still pending consideration and the expenditure may not be allowed as a deduction in its assessment. ITO found that since firm's assessment was complete and the expenditure had been allowed in appeal, provisions of S. 41(1) of the Act were clearly applicable. Accordingly, he treated the said amount as liable to be taxed under S. 41(1) of the Act. Assessee carried the matter in appeal before the Appellate Assistant Commissioner (in short the 'AAC'). Said authority directed exclusion of the amount from assessment. He was of the opinion that the refund could only be assessed in the hands of the firm in whose case it was allowed as an expenditure. Matter was carried in appeal by the Revenue before the Tribunal. Revenue's stand was that assessee being the successor was liable to be treated at par with the firm and the aforesaid S. 41 (1) was clearly applicable. Reference was made by the assessee to a decision of the apex Court in CIT vs. Hukumchand Mohanlal 1972 CTR (SC) 273 : (1971) 82 ITR 624 (SC) : TC 44R.253 to contend that AAC's conclusions were in order. Tribunal affirmed the views of AAC. Prayer for reference under S. 256(1) of the Act was turned down, but on being moved under S. 256(2) of the Act, the question as set out above, was directed to be referred.

(3.) SEC . 41(1) at the relevant point of time read as follows :