Shyamal Kumar Sen, J. - (1.) Pursuant to the direction of this court under Section 256(2) of the Income-tax Act, 1961, the Tribunal has referred the following questions : For the assessment year 1977-78 : "Whether, on the facts and in the circumstances of the case and on a true interpretation of the provisions of sections 30, 37 and 36 of the Income-tax Act, 1961, the Tribunal was justified in holding that a part of the rent which was paid by the assessee-firm in respect of the flats occupied by its partners, posted in Delhi and in Bombay branches during the relevant previous year, was rightly disallowed by the Income-tax Officer ?" For the assessment years 1978-79 to 1983-84 : "Whether, on the facts and in the circumstances of the case and on a true interpretation of the provisions of sections 30, 37 and 38 of the Income-tax Act, 1961, the Tribunal was justified in holding that a part of the rent which was paid by the assessee-firm in respect of the flat occupied by its partner, posted in Bombay branch during the relevant previous year, was rightly disallowed by the Inspecting Assistant Commissioner, Special Range-V ?"
(2.) The facts, inter alia, as appears from the statement of case are that the assessee is a registered firm and derives income from profession as chartered accountants. The dispute is about the disallowance of a portion of the rent paid for the flats in Bombay and Delhi. The assessee-firm had its branches at Delhi and Bombay, etc. In October, 1971, the assessee took a flat and a garage in a building known as ANITA from Mrs. Harkirat Anand in Bombay. On the basis of the said agreement, the flat and garage were taken firstly for three years. The rent for the flat was fixed at Rs. 1,650 per month. One of the partners of the firm, Shri D. C. Rajan, who was in charge of the Bombay branch, was residing in the said flat. The Bombay branch has its own office. Sri Rajan was paying a rent of Rs. 660 per month. However, it was claimed that Shri Rajan was discharging his official duties even from his residence and, therefore, the rent paid for the flat and garage of ANITA building should be allowed as business expenses. The Income-tax Officer/Inspecting Assistant Commissioner did not accept the claim of the assessee in respect of the rent of the flat. However, he was convinced that the garage was used for the car of the assessee-firm. Accordingly, he after deducting the rent paid by Shri Rajan and accepting that the rent of garage was paid for the assessee's business disallowed a sum of Rs. 11,880 out of the rent paid for the flat in ANITA building during the years under appeal.
(3.) Similarly, a disallowance of Rs. 6,920 was made in respect of the Delhi flat. The assessee was having a branch office in Delhi and was also having a flat which was occupied by Shri S. Bhattacharya, a partner of the assessee-firm. Shri Bhattacharya was contributing Rs. 400 per month for the said flat. The assessee claimed such amount as rent paid for the business. The flat was under the occupation of the assessee for nearly 10 months. The Assessing Officer for the reasons indicated above did not accept the claim of the assessee and disallowed Rs. 6,920 for the assessment year 1977-78.;