TMI Blog1993 (7) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... ight in law in invoking the provisions of section 40A(2)(a) of the Income-tax Act, 1961, to disallow part of the rent payments made for the period after August 11, 1972, at the rate of Rs. 4,000 per month ? (2) Whether the Tribunal erred in law and acted beyond the jurisdiction vested in it under section 254(1) of the Income-tax Act, 1961, in deciding and declaring the allowable deduction on account of rent for the period even beyond March 31, 1974 ? (3) Whether, on the facts and in the circumstances of the case and under section 30 of the Income-tax Act, the Tribunal is right in allowing rent for the entire period August 11, 1972, to March 31, 1974, against the income chargeable for the previous year ended March 31, 1974 ?" The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 4,000 from August 11, 1972, and the company agreed to treat the amount of Rs. 2,71,228.40 paid under the agreement of sale as rent deposit. Out of this, an amount of Rs. 50,000 was agreed to be treated as security deposit for payment of rent and the balance amount to be adjusted against rents from December 1, 1973, till the entire amount was wiped off. The security deposit shall not carry interest but is liable to be repaid to the tenants at the time of surrender. For the assessment year 1974-75, the Income-tax Officer completed the assessment by allowing a deduction of Rs. 11,130 out of a total amount of Rs. 78,710 claimed as deduction towards rent paid. On appeal, the Appellate Assistant Commissioner enhanced the amount liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure is incurred in respect of payment of rent to the two directors of the company who owned the buildings. While considering the amount deductible towards rent paid, the Tribunal has taken into account the benefits derivable from the security deposit and the balance outstanding with the owners in connection with the agreement of sale which did not materialise. This deduction made by the Tribunal, according to the assessee, was not proper, the assessee being found liable to pay rent at the rate of Rs. 4,000 per month from August 11, 1972. This question, according to learned counsel for the Revenue, is a question of fact and a reference to this court on that question will not lie. Counsel referred to the decision of the Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from August 11, 1972, to March 31, 1974, against the income chargeable for the assessment year 1974-75 corresponding to the previous year ending on March 31, 1974. On August 11, 1972, the company had agreed to purchase the buildings occupied by them. Considerable portion of the sale consideration was also paid before the stipulated date. The sale did not materialise on account of the failure of the purchaser to pay the balance consideration. As per the terms of the agreement, the purchaser was liable to pay monthly rent at the rate of Rs. 3,000 from the date of default up to the date of completion of sale in case default was made by the purchaser in completing the sale on the date fixed. Such payment was to be made as per the stipulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 11, 1972, to March 31, 1974, is liable to be adjusted or not does not arise out of the order of the Tribunal. That question is not seen to have been raised before the Tribunal nor considered by it. While considering the identical provisions contained in the Indian Income-tax Act of 1922, the Supreme Court in New Jehangir Vakil Mills Ltd. v. CIT [1959] 37 ITR 11, held that the scope and subject-matter of the reference under section 66(2) is co-extensive with that of the reference under section 66(1) of the Income-tax Act and the High Court has no power or jurisdiction under section 66(2) to travel beyond the ambit of section 66(1). The same question was considered by the Supreme Court again in CIT v. Anusuya Devi [1968] 68 ITR 750. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to the assessee, the Tribunal has erred in deciding and declaring the allowable deduction on account of the rent for the period even beyond March 31, 1974. Under section 4 of the Income-tax Act, the subject of charge is the income of the previous year and each previous year is a distinct unit for the purposes of assessment. The previous account of the liabilities or losses incurred before or after the relevant previous year are immaterial in assessing the profits of that year. In the present case, the Tribunal was concerned only with the profits and gains for the assessment year 1974-75 and not profits and gains and liabilities, if any, after March 31, 1974. The Tribunal has, therefore, erred in its observation that the question of di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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