- (1.) THE Income Tax Appellate Tribunal, Delhi, has referred the following two questions of law under Section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act), for opinion to this Court: 'Whether, on the facts and circumstances of the case, the Tribunal was correct in law in confirming the action of the lower authorities in allowing deduction for Rs. 30,000 only as against the claim for collection charges to the tune of Rs. 71,701 ? Whether, on the facts and in the circumstance of the case, the Tribunal misdirected itself in law in being its conclusions on irrelevant material and in ignoring other essential material on record
(2.) THE reference relates to year 1986 -87. Briefly stated the facts giving rise to the present reference are as follows The applicant is a firm deriving income from property representing godowns at Maliyana as well as from houses in Chipi Tank and Kaiserganj. The other income of the applicant, firm is from interest. The applicant disclosed an annual letting value of the property at Maliyana at Rs. 11,95,053. Deduction from this annual letting value was claimed on account of collection charges of Rs. 71,703. This sum comprised of rent collection account of Rs. 49,286 and another amount of Rs. 22,417 on account of car, legal expenses and depreciation Rs. 49,286 represented salary of Rs. 38,605 and Rs. 10,680 on account of conveyance expenses. The salary represented payments to 12 employees who were employed for the purposes of collection or rent. The number of godowns that were not lot out by the applicant were 20 in numbers. On the above godowns, two godowns each were let to two different parties and there were godowns which were let out only for a period of 7 to 15 days which remained vacant for the rest of the period. The assessing officer concluded that for collection of the rent, the services of 12 employees was unnecessary and the similarly expenses on conveyance was not justified. The other amount of Rs. 22,417 representing expenses on car, legal expenses and depreciation were found to be estimated. out of the total expenses of Rs. 74,672. The assessing officer, accordingly, restricted the deduction of collection charges to Rs. 30,000 only.
(3.) IN appeal, the applicant submitted that all the 12 employees were not employed simultaneously and the applicant had made efforts to keep the expenditure to the minimum which the Deputy Commissioner (Appeals) observed was not supported by any documentary evidence. fie, accordingly, confirmed the order of the assessing officer. The Tribunal after considering the rival submissions on the above facts, in para 5 of its order dated 6 -5 -1991 observed as under: have given my careful consideration to the rival submissions, I do not think there was necessity of 12 employees for collection work. To my mind these employees were engaged by the applicant for overall work connected with the godowns, such as, repairs, maintenance, taxes, banking work, etc. The total claim made towards collection charges is Rs. 71,703. The assessing officer has already allowed 1/6th towards repairs at Rs. 1,99,175. These employees will be supervising repairs of the godowns also. Supervision charges of repairs are separately considered then the entire claim of Rs. 71,000 and odd can be said to have been allowed by the assessing officer partly against collection charges and partly towards repairs. The allowance of Rs. 30,000 by the assessing officer towards collection charges and confirmed by the Commissioner (Appeals), therefore, appears to be reasonable. No interference with his order on Chis account is called for.;