2003 (4) TMI 500 - AT - Income Tax

Issues Involved:
1. Deletion of disallowance under section 43B.
2. Deletion of disallowance under the head interest.
3. Deletion of disallowance of depreciation claimed on temple.
4. Deletion of disallowance of gratuity fund payment under section 43B.
5. Deletion of disallowance of provision for bonus under section 43B.
6. Deletion of disallowance on account of entertainment expenses under section 37(2).
7. Setting aside of the addition under section 41(1).
8. Treatment of interest income as business income.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance under Section 43B:
The Tribunal considered two separate orders for the assessment years 1992-93 and 1994-95. The revenue appealed against the deletion of disallowance under section 43B concerning Central Sales Tax and Assam Sales Tax. The Tribunal noted that the assessee recorded sales tax in a separate account and did not claim it as a deduction in the profit and loss account. The Tribunal followed the decision of the Hon'ble Gauhati High Court in India Carbon Ltd. v. IAC [1993] 200 ITR 759, which was upheld by the Supreme Court, concluding that section 43B would not apply where no deduction was claimed. Thus, the Tribunal dismissed the revenue's appeal on this issue.

2. Deletion of Disallowance under the Head Interest:
The Tribunal addressed the disallowance of interest for the assessment years 1992-93 and 1994-95. It was noted that similar issues were decided in favor of the assessee in earlier assessment years, specifically 1991-92, upheld by the Gauhati High Court. Given the identical facts, the Tribunal confirmed the order of the CIT(A) and dismissed the revenue's grounds.

3. Deletion of Disallowance of Depreciation Claimed on Temple:
The Tribunal addressed the disallowance of depreciation on a temple. The learned Departmental Representative admitted that the issue was covered by the jurisdictional High Court's decision in CIT v. India Carbon Ltd. (No. 1) [1996] 221 ITR 125 (Gauhati), which was in favor of the assessee. Consequently, the Tribunal dismissed the revenue's appeal on this ground.

4. Deletion of Disallowance of Gratuity Fund Payment under Section 43B:
The Tribunal noted that the issue of disallowance of gratuity fund payment under section 43B was covered by its earlier decision for the assessment year 1991-92, which was in favor of the assessee. Supported by the Gauhati High Court's decision in CIT v. Assam Tribune [2002] 253 ITR 93, the Tribunal dismissed this ground of the revenue's appeal.

5. Deletion of Disallowance of Provision for Bonus under Section 43B:
For the assessment year 1994-95, the Tribunal reversed the CIT(A)'s order and restored the AO's disallowance of the provision for bonus under section 43B, following its earlier decision for the assessment year 1993-94, which was against the assessee.

6. Deletion of Disallowance on Account of Entertainment Expenses under Section 37(2):
The Tribunal addressed the deletion of Rs. 42,083 on account of entertainment expenses under section 37(2) for the assessment year 1994-95. The learned Departmental Representative admitted that the issue was decided in favor of the assessee in an earlier decision for the assessment year 1993-94. The Tribunal followed this precedent and dismissed the revenue's ground.

7. Setting Aside of the Addition under Section 41(1):
The Tribunal noted that the addition of Rs. 1,10,42,023 under section 41(1) was settled in favor of the assessee in the AO's order dated 19-2-1998 and that the tax on this amount was paid under the VDIS 1997 Scheme. Thus, the Tribunal dismissed this ground as infructuous.

8. Treatment of Interest Income as Business Income:
The Tribunal addressed the treatment of interest income of Rs. 4,50,459 as business income. The CIT(A) directed the AO to treat the interest income as business income, noting that the deposits were incidental to the business. The Tribunal upheld this direction, emphasizing the necessity of a reasoned order, and dismissed the revenue's ground.

Cross Objections:
The assessee's cross objections merely supported the CIT(A)'s orders. Given the Tribunal's decisions on the appeals, the cross objections were dismissed as infructuous.

Conclusion:
The Tribunal dismissed the revenue's appeal for the assessment year 1992-93 and partly allowed the appeal for the assessment year 1994-95. Both cross objections filed by the assessee were dismissed.

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