1999 (7) TMI 40 - HC - Income Tax

Summary

Issues:
1. Deductibility of expenditure on foreign tour for business purposes.
2. Admissibility of expenditure for running a football tournament as a deduction for business profits.
3. Interpretation of relief under section 80J of the Income-tax Act for a new industrial undertaking.

Analysis:

Issue 1:
The first issue pertains to the deductibility of an expenditure incurred on a foreign tour for business purposes. The court referred to a previous decision related to the same assessee for the assessment year 1969-70. Citing the case of Delhi Cloth and General Mills Co. Ltd. v. CIT [1986] 158 ITR 64, the court ruled in favor of the assessee, allowing the deduction for the expenditure. The judgment was delivered by Judge ARUN KUMAR.

Issue 2:
The second issue concerns the admissibility of an expenditure of Rs. 65,746 for running a D.C.M. Football Tournament as a deduction for calculating business profits. The court relied on a prior decision involving the same assessee for the assessment year 1965-66, as per Delhi Cloth and General Mills Co. Ltd. v. CIT [1992] 198 ITR 500. Following this precedent, the court ruled in favor of the assessee, allowing the deduction against the Revenue.

Issue 3:
The final issue revolves around the interpretation of relief under section 80J of the Income-tax Act for a new industrial undertaking. The assessee claimed relief at 6% of the capital employed for the full assessment year 1970-71, even though production commenced only on February 1, 1969. The Income-tax Officer calculated the relief on a pro rata basis for the actual working period of five months. However, the Appellate Assistant Commissioner and the Tribunal disagreed, allowing the relief for the entire year. The court, considering liberal construction in line with previous decisions and a circular by the Central Board of Direct Taxes, ruled in favor of the assessee, granting the relief for the full year despite partial production.

In conclusion, the judgment favored the assessee on all three issues, emphasizing the importance of legal precedents, statutory interpretation, and administrative guidelines in determining tax liabilities and deductions.