2002 (7) TMI 790 - AT - Income Tax

Issues Involved:
1. Admissibility of the appeal.
2. Deduction for incremental provision for bad and doubtful debts and advances.
3. Disallowance of traveling expenses.
4. Disallowance of foreign travel expenses for spouses of employees.
5. Disallowance of entertainment expenses.
6. Disallowance of club expenses.
7. Disallowance of conference expenses.
8. Allowability of expenses on foreigners' visits.
9. Disallowance of excise duty paid.
10. Disallowance of customs duty paid.
11. Deduction of customs duty included in the valuation of closing inventory.
12. Deduction of excise duty included in the valuation of closing stock.
13. Disallowance of claim under s. 35D.
14. Allowability of taxes paid in the USA.
15. Disallowance of premium payable on redemption of debentures.
16. Deductibility of provision for leave encashment.
17. Disallowance of expenses of the nature of advertisement.
18. Treatment of certain expenditure as capital expenditure.
19. Deduction of lease rent paid.
20. Deduction of income from sales of special import licenses (SIL).
21. Allocation of administrative overheads.
22. Disallowance of prior period expenses.
23. Disallowance of dealer commission.
24. Treatment of penalty levied under the Sales Tax Act.
25. Exclusion of interest and miscellaneous income for deduction under ss. 80HH and 80-I.
26. Computation of deduction under s. 80HHC.
27. Deduction under s. 80-O.
28. Enhancement of taxable income by restricting eligible deductions under Chapter VI-A.
29. Disallowance of traveling expenses under r. 6D.
30. Disallowance of traveling expenses of spouses of employees.
31. Exclusion of income from software exports for deduction under ss. 80HH and 80-I.
32. Inclusion of excise duty and sales tax in total turnover for deduction under s. 80HHC.
33. Interest under s. 234C.
34. Treatment of expenditure incurred for importing software.

Summary:

1. Admissibility of the Appeal:
The appeal was initially objected to by the Departmental Representative on the grounds that it was not signed by a competent person as per r. 47(1) r/w r. 45(2) of the IT Rules, 1962, and s. 140 of the Income-tax Act, 1961. However, the Tribunal held that the defect was curable and since it was cured, the appeal was admitted.

2. Deduction for Incremental Provision for Bad and Doubtful Debts and Advances:
The Tribunal allowed the deduction for bad debts written off, even if the individual accounts were not written off but a consolidated entry was passed. The matter was restored to the AO to verify the claim segment-wise and allow the deduction accordingly.

3. Disallowance of Traveling Expenses:
The Tribunal reduced the disallowance for the asst. yr. 1991-92 to Rs. 50,000 and deleted the disallowance for the asst. yrs. 1992-93 and 1993-94, considering the increased limit for traveling expenses.

4. Disallowance of Foreign Travel Expenses for Spouses of Employees:
The Tribunal dismissed the ground as it was not pressed by the learned authorized representative.

5. Disallowance of Entertainment Expenses:
The Tribunal directed that 50% of the entertainment expenses be treated as attributable to employees and not disallowed. This was based on the fact that employees accompany guests during business meetings.

6. Disallowance of Club Expenses:
The Tribunal held that 50% of the club expenses should not be treated as entertainment expenditure as it was incurred for staff members.

7. Disallowance of Conference Expenses:
The Tribunal held that 50% of the conference expenses should be treated as conference expenses proper and the balance 50% as entertainment expenses.

8. Allowability of Expenses on Foreigners' Visits:
The Tribunal held that 50% of the expenses on foreigners' visits to the leather division should be allowed as business promotion expenses.

9. Disallowance of Excise Duty Paid:
The Tribunal allowed the excise duty paid and held in the PLA under excise rules as it was less than the duty payable on the goods manufactured and held as closing stock.

10. Disallowance of Customs Duty Paid:
The Tribunal held that customs duty paid on raw materials imported forms part of the cost of goods and should be included in the valuation of closing stock.

11. Deduction of Customs Duty Included in the Valuation of Closing Inventory:
The Tribunal dismissed the claim as the customs duty forms part of the cost of goods and should be included in the

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