- (1.) THE Income-tax Appellate Tribunal has, referred the following question under Section 66(1) of the Indian Income-tax Act, 1922 ; " Whether, on the facts and in the circumstances of the case, the sum of Rs. 7,242 paid by the assessee to the Tata Locomotive Engineering Co. Ltd. was rightly held to be a capital expenditure in the hands of the assessee ? "
(2.) THE assessee is a registered firm. It carries on business as a dealer in motor vehicles. During the relevant period it was a dealer of Tata Engineering and Locomotive Co. Ltd. (Telco), under an agreement with that company, for the sale of Mercedes Benz trucks. THE agreement required the assessee to maintain at its own expense an organisation for the sale of vehicles, providing for maintenance of show rooms, service centres, repair shops, etc., and an adequate staff of trained salesmen and a staff of trained technical service personnel. According to the statement of the case, the training was actually imparted by Telco which charged the assessee on that account. It is said that under the training scheme, Telco proposed to build a hostel for the apprentices and to recover the entire cost of the hostel from its several dealers. THE assessee paid Telco a sum of Rs. 7,242 during the accounting year ending December 31, 1960, and claimed that amount as a deduction from its assessable profits for the assessment year 1961-62. THE Income-tax Officer was of the view that the payment was made as the assessee's contribution towards the construction of the hostel, that the hostel would be the property of Telco and that, therefore, it was not a business expenditure. Accordingly, he rejected the assessee's claim. The assessee appealed to the Appellate Assistant Commissioner. He allowed the claim on the ground that although the sum of Rs. 7,242 was a contribution towards the construction of the hostel it was not an expense of a capital nature but was a revenue expense incurred in connection with the business of the assessee. The Income-tax Officer appealed to the Income-tax Appellate Tribunal. The Tribunal set aside the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer, holding that the Sum of Rs. 7,242 was a capital expenditure.
(3.) AT the instance of the assessee, the Tribunal has now made the present reference. When the reference first came on for hearing before this court, it was felt that the statement of the case submitted by the Tribunal was incomplete and accordingly a supplementary statement of the case was called for. The supplementary statement contains a number of documents. There is considerable dispute between the. parties whether the documents were part of the record before the Tribunal when it heard and disposed of the appeal. After hearing the parties on the merits of the reference, it seems to us unnecessary for the purpose of disposing of the reference to refer to any, of the documents accompanying the supplementary statement. The facts set out in the supplementary statement have been gathered from a number of documents, including those to which objection has been taken on behalf of the Commissioner. For the purpose of the case before us, therefore, we propose to confine ourselves to the facts contained in the original statement of the case.;