1998 (2) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Whether centage charges and other expenses paid to Southern Railways can be considered as a revenue outgoing for the assessment year 1972-73.
2. Whether interest received on deposits with the Electricity Board should be deducted from the gross total income for relief under section 80-I.

Issue 1:
The assessee requested the Railways to examine the feasibility of a second railway siding, but later decided to abandon the project. The Railways had already incurred expenses for the second siding, and the assessee claimed it as a business expenditure. The Income-tax Officer and the Appellate Assistant Commissioner disallowed the deduction, stating it was not incurred during the relevant accounting year. However, the Income-tax Appellate Tribunal found that the expenditure was for business purposes and accrued during the relevant accounting year. The High Court agreed, stating that the liability accrued when the assessee decided to abandon the project, not when the Railways quantified the expenses. The Court held that the sum incurred by the assessee on expenses to Southern Railways was for business purposes and allowable as a deduction for the assessment year 1972-73.

Issue 2:
Regarding interest received on deposits with the Electricity Board, it was held that the assessee was entitled to deduction under section 80-I, based on a previous court decision. The Court affirmed that interest received on deposits made with the Electricity Board for the supply of electricity to the industry should not be deducted from the gross total income for determining relief under section 80-I. The Court ruled in favor of the assessee on this issue, based on the previous legal precedent.

The High Court of Madras, in the judgment delivered by N. V. Balasubramanian J., addressed the issues raised by the Department regarding the deduction of expenses paid to Southern Railways and the treatment of interest received on deposits with the Electricity Board. The Court upheld the Tribunal's decision that the expenses to Southern Railways were for business purposes and accrued during the relevant accounting year, allowing them as a deduction for the assessment year 1972-73. Additionally, the Court affirmed that interest received on deposits with the Electricity Board should not be deducted from the gross total income for relief under section 80-I, in line with a previous court ruling.