COMMISSIONER OF INCOME TAX Vs. KHAMBHATWALA M M

JUDGEMENT

(1.) THE assessee is a registered partnership firm and the assessment year under reference is 1978 79, the year of account being Samvat year 2033. The assessee had incurred expenditure of Rs. 27,894 for insurance and Rs. 2,14,086 for port fees, freight charges, etc., in the previous year relevant to the asst. year 1978 79. In the course of assessment for the asst. year 1978 79, the ITO allowed for the assessee's claim for weighted deduction in respect of the said expenditure under S. 35B(1)(b) of the IT Act, 1961 ("The Act" for short). The Commissioner of Income tax (the "Commissioner" for short) invoked the provisions of S. 263 of the Act as, in his view, the assessment made by the ITO was erroneous and prejudicial to the interests of the Revenue to the extent that he had allowed weighted deduction in respect of the aforesaid expenditure under S. 35B(1)(b) of the Act. He, therefore, issued a show cause notice to the assessee and, after hearing it, disallowed the aforesaid claim for weighted deduction made by the assessee. Being aggrieved by the order passed by the Commissioner, the assessee carried the matter in appeal before the Tribunal ("the Tribunal" for short). The Tribunal held to the effect that the assessee was entitled to weighted deduction under S. 35B(1)(b) of the Act, as claimed by it. It further held that since two views on the question were possible, it could not be said that the order passed by the ITO was erroneous and prejudicial to the interests of the Revenue. Therefore, in the view of the Tribunal, the Commissioner could not have invoked the provisions of S. 263 of the Act. The Revenue, being aggrieved by the order of the Tribunal the following two questions have been referred to us, for our opinion, at its instance :

(2.) THE first question which has been referred to us is directly covered by our decision in M. M. Khambhatwala vs. CIT, IT Ref. No. 289 of 1980, disposed of by our judgment delivered today (2nd Dec., 1991) [reported at (1992) 107 CTR (Guj) 59 : (1992) 198 ITR 140 (Guj) : TC 15R.477].. Following the said decision and for the reasons recorded therein, question No. 1 shall have to be answered in the negative and against the assessee.

(3.) REFERENCE answered accordingly with no order as to costs.