1992 (1) TMI 317 - AT - Income Tax

Summary

Issues Involved:
1. Whether the sale of the machine took place during the accounting period relevant to the assessment year 1983-84.
2. Disallowance of Rs. 30,912 as entertainment expenses.
3. Disallowance of Rs. 7,210 as advertisement expenses.

Issue-Wise Detailed Analysis:

1. Sale of the Machine:
The primary issue was whether the sale of a prototype draw texturising machine occurred in the accounting period relevant to the assessment year 1983-84. The assessee contended that the sale was not complete until March 1, 1985, due to a two-year guarantee period stipulated in a letter dated February 24, 1983. The Assessing Officer and the Commissioner (Appeals) held that the sale occurred on March 1, 1983, based on the issuance of a sale bill, receipt of the sale price, and the reduction of the asset from the assessee's books. The Tribunal examined the terms of the contract, the conduct of the parties, and the circumstances of the case. The judicial member concluded that the sale was not complete until March 1, 1985, as the guarantee period constituted a condition precedent to the transfer of property. The accountant member disagreed, asserting that the sale was complete on March 1, 1983, based on the evidence of payment and delivery. The third member, considering the intention of the parties and the stipulations in the letter, concluded that the sale was not complete until March 1, 1985, as the property in the goods passed only after the guarantee period expired.

2. Disallowance of Rs. 30,912 as Entertainment Expenses:
The assessee claimed that the disallowed amount was wholly and exclusively incurred for business purposes and that employees partook in the courtesies. The Tribunal partially accepted the assessee's claim, reducing the disallowance to 50%, following precedents where employee participation in refreshments was not fully disallowed.

3. Disallowance of Rs. 7,210 as Advertisement Expenses:
The assessee argued that the expenditure was of a revenue nature, supported by circulars from the Central Board of Direct Taxes. The Tribunal allowed the expenditure, deleting the disallowance, as it was considered a revenue expense.

Conclusion:
The appeal was allowed partly. The Tribunal held that the sale of the machine did not occur in the accounting period relevant to the assessment year 1983-84. The disallowance of entertainment expenses was reduced by 50%, and the disallowance of advertisement expenses was deleted.