JUDGMENT
[ENTITY] J. - Income-tax Reference No. 78 of 1985 is at the instance of the Department and [CASE NUMBER] at the instance of the assessee. The Revenue got the following two questions referred to us under [SECTION] of the [ACT] :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that a sum of Rs. 74,334 received by the assessee as subsidy should not go to reduce the cost of the asset for the purpose of allowing depreciation ?
2. Whether, on the facts and in the circumstance of the case, the Tribunal was right in holding that the assessee was entitled to weighted deduction under [SECTION] of the [ACT], on Rs. 12,828 paid as premium to the Export Credit Guarantee Corporation ?"
The question referred at the instance of the assessee is :
"3. Whether, on the facts and in the circumstance of the case, the Tribunal was right in holding that the assessee was not entitled to weighted deduction under [SECTION] on Rs. 1,51,651 being the levy by the Coir Board which was refunded to the assessee during a subsequent assessment year ?"
Learned counsel appearing in the case rightly and fairly conceded before us that the questions referred at the instance of the Revenue have been decided against the Department in the decisions in [PRECEDENT] and [PRECEDENT]. So we give the answers to questions Nos. 1 and 2 in the affirmative, against the Department and in favour of the assessee.
The assessee was allowed deduction of Rs. 1,51,651 being the amount paid to the Coir Board. On that amount, the assessee claimed weighted deduction under [SECTION] of the [ACT] (hereinafter referred to as "the Act"). The Income-tax Officer did not accept the assessees contention that the amount levied by the Coir Board is entitled to weighted deduction. On appeal, the Appellate Assistant Commissioner took the view that levy by the Coir Board has been made in the order to carry out extensive advertisement and promotional activities for sale of coir and coir products in overseas markets. Consequently, he took the view that assessee is entitled to weighted deduction in respect of this amount. The Department took up the matter in second appeal before the Income-tax Appellate Tribunal. Before the Tribunal, it was contended that the levy made by the Coir Board was for the purpose of carrying out extensive advertisement and promotional activities for the sale of coir and coir products in overseas markets. The said amount levied by the Coir Board was subsequently refunded to the assessee. The fact that that amount was refunded was not disputed by the assessee before the Tribunal was that the refund should not stand in the way of allowing weighted deduction in the assessment year and that the proper course will be to withdraw the relief, if it is legally possible to do so, in the assessment year during which the levy was returned. The Tribunal did not accept this contention of the assessee.
The short question that arises for consideration is whether the levy made by the Coir Board can be treated as an expenditure incurred by the assessee. For an amount to be an expenditure as per the Supreme Court in [PRECEDENT], it should be something which has gone out of the hands of the assessee irretrievably. For claiming deduction as expenditure the amount should have been spent by the assessee as an amount paid out or paid away. To be a payment which is made irrevocably, there should not be any possibility of the money forming once again a part of the funds of the assessee. If this condition is not fulfilled and there is a possibility of there being a resulting trust in favour of the assessee, the money cannot be considered to have been spent by the assessee. The assessee cannot claim that he had spent out or away the amount which he seeks to get deduction of.
Now, we have to consider whether the amount paid to the Coir Board was an expenditure in the accounting year with which we are concerned. It is true that the Coir Board levied a sum of Rs. 1,51,651. That amount was not one paid out or away by the assessee. It was an amount which was to be returned by the Coir Board. When the amount is returnable by the Coir Board or where the Coir Board is to indemnify the assessee for the amount spent, then according to us, that amount cannot be considered as an expenditure incurred by the assessee. Weighted deduction under [SECTION] of the Act can be claimed only in respect of the expenditure incurred by the assessee. Since the assessee has not incurred any expenditure as understood by the word "expenditure", the assessee is no entitled to any weighted deduction. This is clear from the following finding arrived at by the Tribunal in paragraph 9 of its order :
"There is no justification for allowing weighted deduction when the amount itself has been refunded to the assessee."
The, according to us, means that weighted deduction was disallowed on the ground that the assessee had not incurred "expenditure" of Rs. 1,51,651 for getting the entitlement to have weighted deduction.
Learned counsel representing the assessee raised a contention that the deduction of Rs. 1,51,651 was proper and that the amount is entitled to weighted deduction under [SECTION] of the Act. If during the subsequent year, the Coir Board refunds the amount of Rs. 1,51,651, it is argued, that must be brought to tax in the subsequent year of assessment under [SECTION] of the Act. We find it difficult to accept this argument. Only when allowance or deduction in an assessment year is made on an expenditure and subsequently it is brought back or returned to the assessee on account of remission or cessation thereof, then and then alone can [SECTION] come into operation. In the instant case, since we have found that the assessee had not incurred any expenditure during the assessment year with assessee had not incurred any expenditure during the assessment year with which we are concerned, the return of the amount levied by the Coir Board cannot be termed as remission or cessation which took place during any subsequent assessment year. Therefore, the amount refunded by the Coir Board in the subsequent year is not to be brought to tax by invoking the provisions contained in [SECTION] of the Act.
On the facts and circumstances so this case, we hold that the amount of Rs. 1,51,651 cannot be considered as an expenditure incurred by the assessee which is entitled to weighted deduction under [SECTION] of the Act. Consequently, we answer the third question in the affirmative i.e., in favour of the Revenue and against the assessee.
A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.