1998 (9) TMI 65 - HC - Income Tax

Company Debentures Premia Discount Investment Allowance Data Processing Motor Cars Expenditure

Summary

Issues involved: Assessment years 1983-84, 1984-85, and 1985-86; Deduction for gratuity; Deduction for debenture premium; Spread over method for debenture premium; Allowance under section 32A for data processing machines; Ceilings and restrictions of section 37(3A) for repairs, insurance of motor cars, provident fund, and bonus for drivers.

Deduction for Gratuity:
- Assessee conceded difficulty in pressing for tax benefit again due to already availed benefits in other years.
- Proper method for deduction of debenture premium is pro rata, spreading extra premium over all years from issue to redemption.
- Assessee did not press for favorable answers regarding debenture premium liability deduction.

Spread Over Method for Debenture Premium:
- Supreme Court decision in Madras Industrial Investment's case supports spreading debenture payment clause liability over years from issue to redemption.
- Distinction between discount and premium on debentures not seen; both result in payment over and above face value.
- Division Bench view on spread over method for debenture premium no longer valid post Supreme Court decision.

Allowance under Section 32A for Data Processing Machines:
- Dispute on allowance for data processing machines; no finding that machines are only for office installations.
- CIT v. National Engineering Industries Ltd. supports deductions for data processing machinery.
- Contrary decision in CIT v. Technico Enterprise P. Ltd. not accepted; no specific finding that machines are solely for accounting purposes.

Ceilings and Restrictions of Section 37(3A):
- Disallowances under section 37 not to be extended to earlier sections covering repairs, insurance of motor cars, provident fund, and bonus for drivers.
- Legislative intent on different provisions for salaries, provident fund, and bonus for drivers.
- Answers unfavourable to Department regarding driver and motor car questions referred.

Conclusion:
- All questions in the references answered in the affirmative based on reasonings and discussions provided.
- Order covers all six references, clarified to actually be eight references.
- Parties instructed to act on signed xerox copy of the order.