COMMISSIONER OF INCOME TAX Vs. SARMA J N

JUDGEMENT

(1.) : This is an application filed by the CIT, North-Eastern Region, Shillong, under S. 256(2) of the IT Act, 1961, with a prayer to require the Tribunal, Gauhati Bench, Guwahati, to state a case and to refer to this Court the following question of law : "Whether, on the facts and in the circumstances of the case and in view of the wording in r. 8(2) of the IT Rules, 1962, the Tribunal has not erred in allowing replantation expenses as revenue expenditure ?"

(2.) THE facts of the case are that the respondent carries on the business of producing, manufacturing and selling tea and is assessed under the IT Act, 1961, in the status of an HUF. During the accounting year 1984-85, the respondent incurred some expenses on replantation of tea bushes and, in the course of assessment for the asst. yr. 1985-86, claimed the sum as revenue expenditure. THE ITO, A-Ward, Jorhat, in his assessment order disallowed an amount of Rs. 1,00,000 out of such expenses on plantation on the ground that the expenses were on replanting on an area en bloc which was as good as a new plantation, and were thus capital in nature. Aggrieved by the said order of assessment, the respondent filed an appeal before the CIT(A), North-Eastern Region, Guwahati, who, on an interpretation of r. 8 of the IT Rules, 1962, held the said expenses of Rs. 1,00,000 as revenue expenditure and allowed the same. Against the said order of the CIT(A), the Department preferred an appeal before the Tribunal, Gauhati Bench, and contended that the CIT(A) erred in allowing replanting expenses without considering the fact as to whether the replanting was for replacement of bushes or on virgin area and the Tribunal held :

(3.) WE, however, find that the question as framed by the Department in the reference application is not correctly worded inasmuch as it gives an impression as if the Tribunal allowed the expenses as revenue expenditure on an erroneous interpretation of the rule. It is the CIT(A) who allowed the expenditure under the rule and, according to the Revenue, by overlooking the wording of r. 8(2). WE would, therefore, call upon the Tribunal to state a case for our opinion on the following question of law :