NEWTON CHIKLI COLLIERIES LIMITED Vs. COMMISSIONER OF INCOME TAX MADHYA PRADESH AND BHOPAL
SUPREME COURT OF INDIA
NEWTON CHIKLI COLLIERIES
COMMISSIONER OF INCOME TAX,M.P.,BHOPAL
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S.K. Das, J. -
(1.)Messrs. Newton Chikli Collieries Limited, a private company registered under the Indian Companies Act, is the assessee appellant before us. It carried on the business of raising coal from a group of collieries known as the Newton Chikli Collieries. The controlling interest in the assessee company was with certain Europeans till January, 1946, and one Mrs. Jackson was the managing director till January, 1946, when one K. C. Shah became the managing director. For the assessment year 1949-50 relating to the account year ending on December 31, 1948, the assessee company was assessed to income-tax as well as business profits tax. In so assessing the assessee company, the Income-tax Officer added back a sum of Rs. 50,000 on the ground that expenses under the head "wages and salaries" were inflated to that extent by the assessee company. The assessee company showed a sum of Rs. 12,18,409 as expenses under the head "wages and salaries" for the year in question as against Rs. 8,04,766 for the preceding
"For such defects as were noticed in the keeping of acquittance rolls and wages record, we are of the opinion that the original addition of Rs. 50,000, made by the Income-tax Officer for inflation in wages was quite sufficient. There was no justification in making a further addition of Rs. 2 1/2 lakhs."
(2.)The assessee company then moved the Tribunal under section 66(1) of the Income Tax Act, 1922, and section 19 of the Business Profits Tax Act, 1947, for a reference of certain questions of law arising out of the order of the Tribunal to the High Court. The Tribunal rejected the applications for reference on the ground that the finding as to inflation of wages was a finding of fact and no question of law arose out of it. It may be here stated that the application for a reference with regard to business profits tax rested on the same ground as the application with regard to income-tax. Both related to the question of inflation of wages and the adding back of Rs. 50,000. It is, therefore, not necessary to deal with the assessment of business profits tax separately from that of income-tax.
(3.)The assessee then moved the then High Court of Nagpur under section 66 (2) of the Income Tax Act and the High Court directed the Tribunal to state a case on the following three questions of law :
"1. Whether there was any material before the Tribunal for the finding that the wages had been inflated
2. Is there any material on record supporting the estimate of Rs. 50,000
3. Whether the disallowance of Rs. 50,000 was a valid deduction from expenditure under section 10 of the Act -
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