Expenditure incurred by the assessee in pursuing its claim against the National Bank of Pakistan before the International Chamber of Commerce was capital expenditure and had to be disallowed in the computation of the taxable income.

( 1 ) IN these two sets of three references each, at the instance of the assessee, the Income Tax Appellate Tribunal has REFERRED TO the following question under Section 256 (2) of the Income Tax Act, 1961 (for short the Act ) for the opinion of this Court: "whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure (Rs. 4. 520. 00 in 1967-68, Rs. 1,19,816. 00 in 1968-69 and Rs. l,02,440. 00 in 1969-70) incurred by the assessee in pursuing its claim against the National Bank of Pakistan before the International Chamber of Commerce was capital expenditure and has to be disallowed in the computation of the taxable income?"

( 2 ) SINCE, except for the difference in the amount of expenditure, the question in respect of assessment years 1970-71 to 1972-73 is the same, it is needless to set out the question REFERRED TO in the second set of reference.

( 3 ) THE question REFERRED TO and the statements of case drawn up by the Tribunal, in substance, being similar for all six years, this judgment will govern all the references. The first set of reference (ITRs 214 to 216/80) relate to the assement years 1967-68 to 1969-70 and the second set (Rs 301 16 303/78)pertain 71 tol972-73. The accounting period of the assessee on 30th September of each of the previous calender years.

( 4 ) BEEN engaged in manufacture and sale of cement and also had dealings in shares and agreement dated 2nd 1962 The total consideration for the sale was fixed at Rs. 2,33,66,678. 00 on which interest at 6% per annum was to run from 1st October,1962. According to the terms of the sale the sale pnce and mterest was to be satisfied by export of cement by the PPCIL to the assessee company in Delhi. The supply of cement in satisfaction of the purchase price and interest was to be completed within three years from 19th December,1964 being assessee company. lnaccordancc with the seale deed, the assessee was entitled to receive cement from Pakistan and sell it here in India. But due to hostilities between India and Pakistan and prohibitory proclaims/orders by the Pakistan Government cement as stipulated in the sale agreement was not supplied by the PPCIL to the assessee.

( 5 ) SINCE the PPCIL had failed to supply cement in terms of the sale deed, the assessee company filed a claim against the National Bank of Pakistan, who had furnished Bank Guarantees on behalf of the PPCIL for due performance of the said agreement, before the International Chamber of Commerce and incurred legal and traveling expenses during the previous years relevant to the assessment years 1967-68 to 1972-73.

( 6 ) THE Income-tax Officer did not allow the aforesaid expenditure on the ground that these expenses were incurred for realising the capital on sale of the company s factories and the expenditure was of capital nature. He rejected the assessee s argument that these expenses were incurred in salvaging the assets in the running business and not for realising the capital. Assessee s appeal to the Appellate Assistant Commissioner was unsuccessful.

( 7 ) AGGRIEVED, the assessee took the matter in further appeal to the Tribunal. In its main order for the assessment years 1967-68 to 1969-70, which was followed in assessment years 1970-71 to 1972-73, the Tribunal took the view that the expenditure in connection with the company s case before the International Chamber of Commerce had rightly been disallowed as capital expenditure because the expenditure had been incurred to recover the sale proceeds to capital assets of the company and it was not an expenditure to protect any running business of the company, the business in respect of these factories having been dosed in Pakistan on the sale of factories vide sale deed dated 30th September, 1964. Accordingly, the assessee s appeals were dismissed.

( 8 ) ON Tribunal s refusal to make a reference under Section 256 (1) of the Act, pursuant to the directions issued by this Court, the question