1928 (1) TMI 2 - HC - Income Tax

Summary

Issues Involved:
1. Timeliness of the application under Section 66(3) of the Indian Income-tax Act, 1922.
2. Whether the questions raised by the applicant are questions of law or questions of fact.
3. Determination of allowable expenditure on repairs.
4. Determination of depreciation allowance.

Issue-wise Detailed Analysis:

1. Timeliness of the Application:
The Crown objected that the application was out of time, as the order by the Assistant Commissioner was dated 27th May 1926, and the application to refer the points of law was made on 3rd July 1926. The first counter to this objection was that the Commissioner waived the irregularity by considering and refusing the application. However, it was opined that an executive officer cannot waive a statutory provision. The second, more substantial counter was that the applicant did not receive the Deputy Commissioner's order in time to formulate the questions of law. The order's bare result was communicated on 1st June 1926, and the reasons were furnished on 26th June 1926. It was concluded that the applicant could not be deprived of his rights of appeal under Section 66(3) due to delays in receiving the necessary materials from the Deputy Commissioner.

2. Questions of Law vs. Questions of Fact:
The applicant sought to direct the Commissioner to refer six questions of law to the High Court. The Commissioner had rejected the application, viewing the questions as factual rather than legal. The judgment emphasized that determining whether a point of law arises depends on the specific circumstances of each case. The judgment cited several English cases to illustrate that many questions initially considered legal were, in fact, factual. It was concluded that the questions raised by the applicant were indeed questions of fact, not law.

3. Allowable Expenditure on Repairs:
The Income-tax Officer disallowed Rs. 58,500 of the claimed Rs. 1,16,989 for repairs, considering it exaggerated and including capital expenditure, which is not deductible under Section 10. The Deputy Commissioner and the Commissioner supported this view, noting the applicant's unsatisfactory accounts and potential concealment of expenditure nature. The judgment held that whether expenditure in a shipowner's business is current or capital is a question of fact. The insufficient evidence to support the claim was attributed to the applicant's neglect, reinforcing that the expenditure determination was factual.

4. Depreciation Allowance:
The Income-tax Officials contended that there were no proper materials to deal with the depreciation question, as no capital accounts were provided by the applicant. Despite this, an ex gratia depreciation allowance of Rs. 15,000 was ordered. The judgment stated that depreciation determination is a question of fact, requiring the prime cost of the property. The applicant's failure to provide necessary particulars precluded the determination of depreciation allowance. It was concluded that the allowance determination was factual, and the Income-tax Officials acted reasonably.

Conclusion:
The judgment concluded that the alleged questions of law were actually questions of fact for the Commissioner of Income-tax alone. Consequently, the rule was discharged as not falling within Section 66(3) of the Indian Income-tax Act, 1922. Costs were awarded in favor of the Crown at fifteen gold mohurs.