1998 (4) TMI 60 - HC - Income Tax

Summary

Issues:
1. Deductibility of interest payment to ex-service operators after nationalization declared null and void.
2. Deduction of contribution to Cheran Welfare Trust in total income computation.
3. Allowability of sums paid as subsidies to Cheran House Building Society as revenue expenditure.

Analysis:
1. The first issue pertains to the deduction claimed for interest payment to ex-service operators after the nationalization of the bus service was declared null and void. The Income-tax Officer disallowed the deduction citing the earlier court ruling. However, the Supreme Court later upheld the validity of the Act, making the liability to pay interest retrospective. The High Court held that the interest payment qualified for deduction as the liability existed from the enactment date, affirming the Appellate Tribunal's decision.

2. The second issue involves the deduction of a contribution of Rs. 5 lakhs to the Cheran Welfare Trust in the total income computation. The High Court had previously allowed a similar deduction in the assessee's earlier case, considering it clarificatory in nature. The Tribunal also supported the deduction in the current case, and the High Court found no error in this decision, upholding the Tribunal's view.

3. The final issue concerns the sums paid by the assessee as subsidies to the Cheran House Building Society. The payments were characterized as labour welfare expenditure, which is deductible as revenue expenditure according to a Supreme Court precedent. The High Court concurred with the Appellate Tribunal's decision, stating that the sums paid as subsidies should be allowed as revenue expenditure. Consequently, the High Court answered all three questions of law in favor of the assessee and against the Revenue.