Sudhindra Mohan Guha, J. - (1.) This reference arises out of an application filed by the assessee, Oil India Ltd., Duliajan, under Section 256(1) of the I.T. Act, 1961.
(2.) There is an agreement dated December 27, 1963, between the assessee-company and the Burmah Oil Co. Ltd. under which charges in accordance with the basis set out in the schedule annexed to the said agreement are payable half yearly by the assessee-company to the Burmah Oil Co. Ltd. for the services rendered by the latter to the assessee-company. Clause 7 of the said agreement reads as follows : "In consideration of the services to be performed by the Burmah Oil Co. Ltd. pursuant to Clauses 3 and 5 of this agreement, the company shall pay and allow respectively to the Burmah Oil Co. Ltd. or to the associated or subsidiary company, or the companies actually performing the services, as the case may be, costs determined in accordance with the basis set out in the Schedule annexed hereto. Such costs shall be payable half-yearly, in arrear, in sterling in London and shall become due for payment on receipt by the company of Burmah's debit notes for such costs."
(3.) Originally, a return was filed on September 28, 1970, showing a total income of Rs. 9,08,35,318. Subsequently, a revised return was filed on January 3, 1973, showing a total income of Rs. 9,48,17,590. During the assessment, the ITO passed the order as follows: "The assessee has claimed deduction of Rs. 61,565 being guarantee commission for purchase of Gas Compressor. Similar claim for guarantee commission made in 1969-70 has been disallowed as of a capital nature. As the circumstances are similar, the amount will be disallowed. London office charges paid to the Burmah Oil Co, are being allowed in the earlier assessments with reference to bills issued by that party. Thus, for the assessment year 1969-70, the charges relating to the second half of 1967 and first half of 1968 have been allowed and the claim for deduction relating to the second half of 1968 has been disallowed. On the same basis, the charges for the second half of 1968 and the first half of 1969 will be allowed in this current assessment and the claim for deduction relating to second half of 1969 of Rs. 2,93,623 will be disallowed. This will be considered in the assessment for 1971-72. In all the past assessments, depreciation on bungalows are being allowed @ 2 1/2% only while the assessee has been claiming @ 5% WDV for bungalows for the assessment year 1969-70.";