Law: Income Tax Act, 1961

Section: 256

Section 256 of the Income-tax Act, 1961 - High Court - Reference to (Scope of reference) - Assessment year 1984-85 - High Court disallowed claim of assessee, after considering facts brought on record during assessment proceedings, which were independent of facts considered by Tribunal - Whether in a reference under section 256, it is not permissible for High Court to make a fresh determination of facts found by Tribunal, however, High Court can take into account additional facts already on record but not taken note of by Tribunal to arrive at its findings and also construe certain facts to be of significance as against different view of Tribunal - Held, yes [Paras 8, 9 & 10] [In favour of revenue] FACTS â–  The assessee a partnership firm claimed deduction for service charges paid to one UTC. The Assessing Officer disallowed the said claim under section 40A(2) on the ground that the membership in the assessee-firm and UTC was common and one Mr. K.L. Srihari had a sizeable holding in both the firms. Further, the Assessing Officer disallowed donation made by the assessee to Aparna Ashram under section 35(2A). The Assessing Offcer also disallowed cost towards purchase of film and, accordingly, concluded assessment. â–  On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer. â–  On second appeal, the Tribunal ruled in favour of the assessee. It deleted the disallowance of service charges paid to UTC under section 40A(2). It held that the loss shown by the assessee in the film business was allowable and it also allowed the assessee's claim for deduction under section 35(2A) in respect of donation to Aparna Ashram. â–  On further appeal, the High Court vide its impugned order ruled in favour of the revenue. â–  On appeal by the assessee to the Supreme Court: HELD Disallowance of Service Charges â–  A reading of the order of the Tribunal in favour of the assessee which has been reversed by the High Court would indicate that the Tribunal did not address itself to a very fundamental issue that had arisen before it, namely, effect of the failure of the assessee to produce evidence in support of the services…

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