Tribunal dismisses reference applications on expenses & depreciation; majority opinion rules no questions of law raised.

The Tribunal dismissed the reference applications for various issues, including deletion of disallowances and allowances for different expenses and depreciation. The Tribunal found that the decisions were based on factual findings and did not give rise to any referable questions of law. One member disagreed on certain questions but was overruled by the majority opinion and a third member, concluding that the issues were not referable mixed questions of law and facts.

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Issues Involved:
1. Deletion of additions on account of provision for warranty claim and free service charges for AY 1982-83 and AY 1983-84.
2. Deletion of disallowance on account of royalty paid to M/s Hero Cycles Pvt. Ltd.
3. Deletion of disallowance on account of market feedback expenses paid to M/s Munjal Sales Corporation.
4. Allowance of 25% of the claim of expenses incurred by the assessee on "Research & Development Expenditure".
5. Deletion of disallowance on account of sales-tax for AY 1983-84.
6. Allowance of 100% depreciation on racks treating them as plant.
7. Allowance of expenditure on wooden partitions.
8. Allowance of 15% depreciation on machinery.

Summary:

Issue 1: Provision for Warranty Claim and Free Service Charges (AY 1982-83 and AY 1983-84)
The Tribunal dismissed the reference applications for both years, concluding that no referable question of law arises. The Tribunal found that the method employed by the assessee was scientifically based on actual liability for a few months and commercially expedient. The Tribunal observed that the liability for the warranty claim is included in the sale price and must be allowed as a deduction. The same reasoning applied to the free service charges, as both claims were similar. The Tribunal held that these are findings of fact and do not give rise to any referable question of law.

Issue 2: Royalty Paid to M/s Hero Cycles Pvt. Ltd.
The Tribunal rejected the question, finding that the royalty payment was supported by a resolution and correspondence, and the expenditure was not for any breach of law. The Tribunal noted that the payment was accepted and taxed as the income of M/s Hero Cycles Pvt. Ltd., resulting in no loss to the revenue. Thus, no referable question of law arises.

Issue 3: Market Feedback Expenses Paid to M/s Munjal Sales Corporation
The Tribunal rejected the question, noting that the correspondence and reports supporting the agreement for services were not controverted. The Tribunal found that the payment was much less compared to subsequent years when it was allowed by the Income-tax Officer. The Tribunal did not refer to section 40A(2)(a) of the Act, and the Commissioner of Income-tax's argument was unfounded.

Issue 4: Research & Development Expenditure
The Tribunal found that the allowance of 25% of the expenses was based purely on the facts of the case and did not give rise to any question of law. No miscellaneous application was filed challenging the Tribunal's finding on facts.

Issue 5: Sales-tax Disallowance (AY 1983-84)
The Tribunal rejected the question, stating that it was covered by the judgment of the Hon'ble Punjab and Haryana High Court in the case of Sirsa Industries v. CIT [1989] 178 ITR 437, and there was no need to burden the Court again with the same issue.

Issue 6: Depreciation on Racks
The Tribunal found that the racks installed in the machine shop are to be treated as plant, following the judgment of the Supreme Court in CIT v. Elecon Engg. Co. Ltd. [1987] 166 ITR 66, and properly allowed 100% depreciation. This question was also rejected.

Issue 7: Expenditure on Wooden Partitions
The Tribunal found that the allowance of expenditure on wooden partitions was purely a finding of fact and did not give rise to any question of law.

Issue 8: Depreciation on Machinery
The Tribunal allowed 15% depreciation on machinery, first in AY 1982-83 and followed for AY 1983-84. The revenue did not seek a question for AY 1982-83, and the Tribunal found no referable question of law for AY 1983-84.

Separate Judgment:
One member, Mehra, JM, disagreed with the majority opinion regarding question No. 1 for AY 1982-83 and question No. 4 for AY 1983-84, considering them referable mixed questions of law and facts. The matter was referred to a third member, who agreed with the majority opinion that these questions are not referable as they are based on pure findings of fact.

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