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Issues Involved:
1. Guarantee commission paid to ICICI. 2. Telephone and medical expenses as 'perquisite' u/s 40A(5)/40(c) of the Act. 3. Foreign tour expenses as revenue expenditure. 4. Disallowance of telephone expenses and insurance premium u/s 40A(5) read with section 40(c). 5. Entitlement to development rebate at 25% for machinery division. 6. Legal expenses for resisting higher compensation as capital expenditure. 7. Power of Income-tax Officer to revise draft assessment order u/s 144B. 8. Loss due to fluctuation in foreign exchange as capital expenditure. Summary: Issue 1: Guarantee Commission Paid to ICICI The Tribunal disallowed the guarantee commission paid to ICICI as revenue expenditure. However, the Supreme Court in Addl. CIT v. Akkamamba Textiles Ltd. [1997] held such expenditure as revenue expenditure. Therefore, the question is answered in the negative, in favor of the assessee. Issue 2: Telephone and Medical Expenses as 'Perquisite' u/s 40A(5)/40(c) of the Act The Tribunal disallowed 1/6th of telephone expenses and reimbursement of medical expenses to directors as 'perquisite'. The Tribunal's decision was upheld, treating these expenses as not allowable. The question is answered in the affirmative against the assessee. Issue 3: Foreign Tour Expenses as Revenue Expenditure The Tribunal disallowed foreign tour expenses for setting up new projects as capital expenditure. The court upheld this view, treating such expenses as capital in nature. The question is answered in the affirmative against the assessee. Issue 4: Disallowance of Telephone Expenses and Insurance Premium u/s 40A(5) read with section 40(c) The Tribunal allowed only 1/6th of telephone expenses, considering it as personal expenses of directors, and allowed the entire insurance premium. The court upheld the Tribunal's decision. The question is answered in the affirmative against the Revenue. Issue 5: Entitlement to Development Rebate at 25% for Machinery Division The Tribunal allowed a higher development rebate of 25% for the machinery division, considering it as industrial machinery. The court upheld this decision. The question is answered in the affirmative in favor of the assessee. Issue 6: Legal Expenses for Resisting Higher Compensation as Capital Expenditure The Tribunal treated legal expenses for resisting higher compensation as capital expenditure. The court upheld this view, considering such expenses as part of the cost of acquiring the capital asset. The question is answered in the affirmative against the assessee. Issue 7: Power of Income-tax Officer to Revise Draft Assessment Order u/s 144B The Tribunal allowed the Income-tax Officer to revise the draft assessment order and give a fresh hearing. The court upheld this decision, noting no procedural illegality. The question is answered in the affirmative against the assessee. Issue 8: Loss Due to Fluctuation in Foreign Exchange as Capital Expenditure The Tribunal treated the loss due to fluctuation in foreign exchange as capital expenditure. The court upheld this view, considering it under section 43A of the Act. The question is answered in the affirmative against the assessee. Conclusion: The questions referred are answered accordingly, with no order as to costs.
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