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TMI Blog2002 (4) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... g Regulation Act, 1949. The Inspecting Assistant Commissioner of Income-tax by his order dated March 21, 1980, disallowed certain claims of the petitioners for the assessment year 1977-78. On the petitioners filing an appeal, the contentions of the petitioners were partly accepted and the Income-tax Appellate Tribunal by its order dated October 13, 1983, held as follows : (a) that the method of accounting adopted by the petitioner in determining its profits or losses from the sale of securities as also the profit on revaluation and interest of broken period should be followed as in the past ; (b) that in accordance with the petitioner's method of accounting in respect of interest on sticky loans these should be taxed on receipt basis ; (c) that section 44C was applicable to disallow expenses incurred only after June 1, 1976 ; (d) that section 40A(5) was not applicable to expenses allowable under section 20 of the Act ; and (e) that club membership subscription fees were not disallowable under section 40A(5) of the Act. The respondent No. 4, the Commissioner of Income-tax, thereafter sought reference of certain questions of law to this court arising out of that order. The Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of section 40A(5) of the Income-tax Act, 1961, are not applicable to the proportionate expenses deductible under section 20 of the Income-tax Act for computing income chargeable to tax under the head 'Interest on securities' even though such interest on securities and treasury bills was part of the business profits of the assessee ? (8) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of section 40A(5) of the Income-tax Act are not applicable for disallowance of the expenses incurred by the assessee in respect of the club membership subscription fees paid in respect of the employees of the assessee-company ?" The Tribunal proposed a draft statement of the case on May 12, 1986, and decided to refer only questions Nos. 5 and 8 out of these eight questions for the decision of the High Court. After that draft statement was prepared, a notice dated May 29, 1986, was issued to both the parties concerned enclosing therewith the draft statement and informing that the application under section 256 was fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1986, nor is it stated in the petition as to in what manner this objection was raised before the Tribunal that such addition cannot be done and that the petitioners were objecting to any such addition. It is not stated that any affidavit was filed raising such objection nor is it contended that counsel appearing for the petitioners had orally raised this objection. This becomes relevant when one finds that learned counsel who appeared before the Tribunal when the statement of case was drawn and the one who settled present writ petition is one and the same. That apart as held by the apex court in State of Maharashtra v. Ramdas Shrinivas Nayak, AIR 1982 SC 1249, the principle is well settled that the statements of facts as to what transpired at the hearing, recorded in the judgment of the court are conclusive of the facts so stated and no one can contradict such statements by affidavit or other evidence. It is, therefore, not possible to accept this submission raised for the first time in the petition that the petitioners had objected at the time of hearing to the addition of the questions as added. The second objection raised in the petition is in paragraph 10 of the petition, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. If they approved of that statement that is the agreed statement of facts by the parties on which the High Court has to pronounce its judgment. In the present case, the parties perused the statement of case and as disclosed by the note made at the end of it, had no suggestions to make in respect thereof. It is therefore clear that it was the duty of the High Court to start with that statement of the case as the final statement of facts. Surprisingly, we find that the High Court, in its judgment, has taken the argument of Mr. Mitra as if they were facts and have based their conclusion solely on that argument. Nowhere in the statement of the case prepared by the Tribunal and filed in the High Court, the Tribunal had come to the conclusion that the payment was made by the assessee-company to avoid any danger of public exposure or to save itself from scandal or in order to maintain the managing agency of the appellant-company." As the paragraph itself clearly points out it is essentially with respect to the question as to what constitutes the final statement of facts. All that it states is that the parties have full opportunity to apply for any addition or deletion at the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of the case as suggested by the assessee. This judgment also does not advance the proposition sought to be canvassed by Mr. Mistry. Mr. Mistry then referred to the Appellate Tribunal Rules, 1963, and particularly rule 44 which deals with preparing of the statement of case if a question of law arises. He also pointed out that under rule 43 if in the opinion of the Tribunal no question of law arises, then the application for reference can be dismissed. He was, however, not in a position to point out any provision with respect to a draft statement being prepared prior to the final statement of case. We were, however, told by counsel for both the parties that the said practice has developed over the years. In fact, as far as section 256 is concerned, it only provides for drawing of the statement of case by the Tribunal and does not speak of any draft statement. The section reads as follows : "256. Statement Of case to the High Court. -(1) The assessee or the Commissioner may, within sixty days of the date upon which he is served with notice of an order passed before the 1st day of October, 1998, under section 254, by application in the prescribed form, accompanied where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what is material is that in this context, the Division Bench of the Gujarat High Court observed as follows : "We may point out that till the stage when the reference is actually filed in court, the earlier stages which the Tribunal goes through are tentative stages and not final and at no intermediary stage can it be said that a final decision is taken by the Tribunal. It is possible that in a particular case in the process of formulating the questions of law, the Tribunal may feel that its earlier decision regarding how many questions out of the questions suggested by the applicant should be referred to the court, should be recast or reconsidered. It is obvious that the statement of the case will have to be drawn up in the light of the questions that are actually decided by the Tribunal as questions requiring to be referred to the High Court." The proposition laid down in this authority has been commented upon in the commentary by Kanga and Palkhivala eighth edition at page 1535 as follows : "At the hearing on the draft statement of the case, it is open to a party to reagitate that a question which the Tribunal has not included in the draft statement should also be referred." ..... X X X X Extracts X X X X X X X X Extracts X X X X
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