1992 (5) TMI 194 - HC - Income Tax

Court allows condonation of delay under Income-tax Act, emphasizes Limitation Act, and directs Tribunal on expenditure.

The Court allowed the application for condonation of delay under section 256(2) of the Income-tax Act, holding that the power to condone delay is not ... Condonation of delay under section 5 of the Limitation Act, 1963 - Applicability of savings provision of the Limitation Act to special or local law - Reference of questions to High Court under section 256(2) of the Income-tax Act - Revenue versus capital nature of contribution for construction of buildingCondonation of delay under section 5 of the Limitation Act, 1963 - Applicability of savings provision of the Limitation Act to special or local law - Reference of questions to High Court under section 256(2) of the Income-tax Act - Power of the High Court to condone delay in filing an application under section 256(2) of the Income-tax Act and exercise of that power in the present case - HELD THAT: - The Court held that section 5 of the Limitation Act, 1963 applies to applications required to be filed in Court, and that section 29(2) of the Limitation Act preserves the applicability of the general provisions of the Act to suits, appeals or applications under special law unless expressly excluded. Consequently, the absence of an express power to condone delay in section 256(2) of the Income-tax Act does not oust the Court's jurisdiction under section 5 of the 1963 Act. The Court followed the decision of the Gauhati High Court and distinguished earlier authority under the 1908 Act. On the merits the respondents did not oppose condonation; the Court accordingly exercised its discretion and condoned the one day delay in filing the application. [Paras 4, 5, 6, 7, 8]Delay of one day in filing the application under section 256(2) is condoned; the High Court has power under section 5 of the Limitation Act, 1963 to entertain such an application.Reference of questions to High Court under section 256(2) of the Income-tax Act - Revenue versus capital nature of contribution for construction of building - Whether the Tribunal should be directed to refer question No. 2 (allowability as business expenditure of contribution to an association for constructing a building) to the High Court - HELD THAT: - The Court observed that the legal principle on whether a contribution towards construction of a building is revenue or capital in nature is governed by earlier Supreme Court decisions and by this Court's decision in CIT v. Delhi Cloth & General Mills Co. Ltd. The present contribution to the Association of Indian Engineering Industries for constructing a building presents the same principle as in the cited Delhi Cloth & General Mills decision. As that precedent clearly decides the point, the answer to question No. 2 is self evident and does not require a reference by the Tribunal. [Paras 10, 11, 12, 13]Question No. 2 need not be referred to the High Court as the established Supreme Court ratio (and this Court's application of it) conclusively governs the issue; only question No. 1 is directed to be referred by the Tribunal.Final Conclusion: The Court held that it has power under section 5 of the Limitation Act, 1963 to condone the one day delay in filing the section 256(2) application and accordingly condoned the delay; it declined to call for a reference on question No. 2 as that issue is governed by settled Supreme Court precedent, and directed the Tribunal to refer only question No. 1 to the High Court. Issues:1. Condonation of delay in filing an application under section 256(2) of the Income-tax Act.2. Interpretation of the provisions of the Limitation Act in relation to condonation of delay.3. Merits of the petition under section 256(2) regarding the deductibility of certain expenditures.Analysis:Issue 1: Condonation of DelayThe petitioner filed an application under section 256(2) seeking reference of questions to the Court. The application was filed one day late due to a misunderstanding about the Court's opening date. The respondents contended that the Court lacked the power to condone the delay. However, the Court disagreed, stating that while the Act specifies a limitation period for filing under sections 256(1) and 256(2), the power to condone delay is not explicitly excluded under section 256(2). The Court referred to the provisions of the Limitation Act and held that section 5 of the 1963 Act allowed for the condonation of delay in filing applications required in Court.Issue 2: Interpretation of Limitation Act ProvisionsThe Court analyzed the provisions of the Limitation Act, emphasizing that section 5 of the 1963 Act permits the condonation of delay even for applications required to be filed in Court. The Court cited section 29(2) of the Limitation Act, which allows for the application of section 3 to special or local laws unless expressly excluded. The Court concluded that it had the jurisdiction to exercise powers under section 5 of the 1963 Act, as confirmed by a previous decision of the Gauhati High Court.Issue 3: Merits of the Petition under Section 256(2)Regarding the deductibility of expenditures, the Court considered two questions. The first question related to the allowability of a portion of technical know-how expenditure as revenue expenditure. The Court directed the Tribunal to refer this question to the Court. The second question concerned the deductibility of a payment made by the assessee to an association as business expenditure. Citing a previous decision, the Court found the answer to the second question self-evident based on established principles and declined to refer it to the Court. The Court's decision was influenced by the application of Supreme Court decisions in similar cases.In conclusion, the Court allowed the application for condonation of delay, directed the Tribunal to refer the first question to the Court, and declined to refer the second question based on established legal principles.