COMMISSIONER OF INCOME TAX Vs. KILCO REFRIGERATION

JUDGEMENT

(1.) AT the instance of the Commissioner of Income-tax, Cochin, the Income-tax Appellate Tribunal (for short, "the Tribunal"), Cochin Bench, has referred the following questions of law for the opinion of this court.

(2.) THESE questions were referred by the Tribunal as directed by the judgment of this court in O. P. No. 3271 of 1974. The assessee is a registered firm. The assessment year in question is 1978-79 for which the previous year ended on December 31, 1977. The assessee had business dealings as agents and stockists of its principals. The assessee executed certain contracts for a firm by name Messrs. Paksons Industries. The total amount of the contract was Rs. 3,54,000. Messrs. Paksons Industries had obtained financial assistance from the Kerala Financial Corporation.

(3.) THE assessee filed an appeal before the Tribunal. THE Tribunal found that the amount of Rs. 74,000 could not be treated as the income of the assessee. THE Tribunal proceeded on the basis of the finding of fact that Rs. 74,000 had left the coffers of the assessee and that no specific service was rendered to the assessee by the ten persons in return for the payments. But, the Tribunal accepted the explanation of the assessee that, by this amount, the contract amount has been correspondingly increased and there was no net gain to the assessee from this particular transaction. THE effect of these findings is that Rs. 74,000 was received from Messrs. Pak-sons Industries and it was returned to Messrs. Paksons Industries through "the dubious methods" adopted by the assessee. THE Tribunal also found that there has been "an active collusion" between the assessee and Messrs. Paksons Industries for putting up artificially the cost of a freezing plant, which the assessee had contracted to do for them and that the purpose of this was only to enable Messrs. Paksons Industries to get a higher amount as loan from the Kerala Financial Corporation. THE final finding of the Tribunal was that the assessee had not retained any part of this sum of Rs. 74,000 in its hands and that it had received the amount on a particular day and returned the same on that day itself to Messrs. Paksons Industries through the medium of ten persons and so the sum of Rs. 74,000 could not be said to be the "real income" of the assessee. In the result, the Tribunal deleted the disallowance of Rs. 74,000. To support this conclusion, the Tribunal has relied on the decision of the Madras High Court in CIT v. Coimbatore Salem Transport (Private) Ltd. [1966] 61 ITR 480. THE Revenue was aggrieved and at the instance of the Revenue, the questions set out in paragraph 1 of this judgment have been referred to this court for its decision.