JUDGMENT
SUHAS CHANDRA SEN, J. :
The Tribunal has referred the following questions of law under s. 256(1) of the IT Act, 1961 :
The questions referred at the instance of the assessee are as under :
(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the gratuity liability actuarially valued at Rs. 3,39,308 but not provided for in the books of accounts was inadmissible as a deduction due to the provisions of s. 40A(7) ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sale proceeds of import entitlements amount to Rs. 3,17,856 were liable to capital gains tax.
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the export promotion expenses in respect of the following items were not entitled to weighted deduction under s. 35B of the IT Act, 1961 –
Rs.
(a) Certificate fees to M/s. S. R. Batliboi & Co.
102
(b) Packing materials for export
54,121
(c) Handling, loading and unloading charges
19,663
(d) Port Commissioners charges
4,499
(e) Export inspection charges
8,417
(f) Bank charges for negotiation of export bills
1,231
(4) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the surtax liability for the year was not an allowable deduction under the IT Act, 1961 in computing the assessees income from business ?
The questions referred at the instance of the CIT are as under :
(1) “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the claim of the assessee under s. 80G of the IT Act, in respect of donation of Rs. 1,00,000 to Viswamangal Trust was allowable ?”
In RA No. 129 (Cal) of 1981 :
“(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that Rs. 81,368 represented liability of the assessee for the asst. yr. 1975-76 ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the action of the CIT(A) in setting aside the order of the ITO for finding out the extent of expenses held to be not in the nature of entertainment expenses in the light of the decision of Gujarat High Court in CIT vs. Patel Bros. & Co. Ltd. (1977) 106 ITR 424 (Guj) ?”
2. In this case the assessment year involved is 1975-76 for which the corresponding accounting year is the year ended on 31st March, 1975.
3. The question No. 1 raised by the assessee is concluded by the judgment of the Supreme Court in the case of Shree Sajjan Mills Ltd. vs. CIT & Anr. reported in (1985) 156 ITR 585 (SC) and the same is answered in the affirmative and in favour of the Revenue.
4. The second question raised by the assessee is also concluded by a judgment of this Court in the case of K. K. Daftary vs. CIT reported in (1977) 106 ITR 998 (Cal) and in view of the question is answered in the affirmative and in favour of the Revenue.
5. The question No. 3 also does not create any difficulty. To claim deduction of expenditures under s. 35B, the assessee must establish the facts to show that the expenditure are of the nature mentioned in the various sub-clauses of s. 35B (1). In the instant case the assessees advocate before the Tribunal conceded that the expenditure could not be allowed as deduction. Under the circumstances this question must also be answered in affirmative and in favour of the Revenue.
6. The question No. 4 is also concluded by a judgment of this Court in the case of Molins of India Ltd. vs. CIT reported in (1983) 144 ITR 317 (Cal). In view of the judgment this question is answered in the affirmative and in favour of the Revenue.
7. So far as questions raised by the Revenue are concerned, the first question relates to the assessees claim for the deduction under s. 80G on account of a donation made to Viswamangal Trust. In view of the judgment of this Court in the case of CIT vs. Upper Ganges Sugar Mills Ltd. (1985) 154 ITR 308 (Cal), the question No. 1 is answered in the negative and in favour of the Revenue.
8. The question No. 2 raised by the Department is also concluded by the principles lad down by the Supreme Court in the case of Kedarnath Jute Mfg. Co. vs. CIT reported in (1971) 82 ITR 363 (SC) and also in the case of Chowringhee Sales Bureau vs. CIT reported in (1973) 87 ITR 542 (SC). The Supreme Court examined the question of deductibility of sales-tax liability and held that the liability should be deducted in the year in which the liability had accrued. The Tribunal has held that in the present case the sales-tax account is credited on mercantile basis though the account is debited on the basis of actual payments. That, however, cannot preclude the assessee from claiming the liability as the whole account is maintained on mercantile basis. In case the declarations were not filed the amount collected had to be paid to the Government, and in case the declarations were filed the assessee was bound to return the amount collected to the parties concerned. We agree that the amount in question represented liability of the assessee and was, therefore, rightly deleted by the CIT(A). Under the circumstances we are of the view that the Tribunal has taken a correct view of law of the assessee.
9. The third question is about an order of remand for finding out the quantum of expenses held to be not in the nature of entertainment expenses. On behalf of the Revenue reliance was placed on the judgment of the Gujarat High Court in the case of CIT vs. Patel Bros. & Co. Ltd. (supra). In that case two questions of law were raised. The first one was whether the expenditure was in the nature of entertainment expenditure. The second one was about the limit of allowable expenditure under s. 37(2)(A) of the IT Act, 1961. No question of propriety of a remand order was raised in that case. We do not see any relevance of this judgment for the purpose of deciding the question of propriety and the correctness of the remand order passed by the Tribunal. We do not find that the Tribunal has erred in any way in remanding the case back to the ITO. Therefore, the question is answered in the affirmative and in favour of the assessee.
10. The questions, therefore, are answered in the following manner :
The question Nos. 1, 2, 3 and 4 raised by the assessee are all answered in the affirmative and in favour of the Revenue.
The question No. 1 raised by the CIT relating to Viswamangal Trust is answered in the negative and in favour of the Revenue.
The question Nos. 2 and 3 referred at the instance of the CIT are answered in the affirmative and in favour of the assessee.
There will be no order as to costs.
BHAGABATI PRASAD BANERJEE, J. :
I agree.