1996 (3) TMI 69 - HC - Income Tax

Appellate Authority, Business Expenditure, Expenditure Incurred, Rent-free Accommodation, Special Deduction, Tax Authorities

Summary

Issues:
1. Whether limited deduction under section 80VV is irrespective of the number of assessment years and applies to fees paid for preparation of statements and schedules annexed to the return of income.
2. Whether the value of the benefit derived by the employee can be substituted for the expenditure incurred by the assessee in assessing the disallowance under section 40A(5) of the Act.
3. Whether surtax is an allowable deduction in computing the total income of the assessee.

Analysis:
1. The court considered the deduction claimed under section 80VV of the Income-tax Act. The assessee had deducted income-tax appeal fees and tax representation and audit fees. The contention was that part of this expenditure may relate to earlier years and audit fees may not be regarded as expenditure incurred for income-tax proceedings covered by section 80VV. The Appellate Tribunal found that the audit fees were related to statements prepared for being annexed to income-tax returns, falling within the scope of section 80VV. The court held that only expenditure incurred in the previous year in respect of any proceedings can be allowed to the extent of Rs. 5,000. As the assessee had not provided a break-up to show the portion of expenditure related to earlier years, the court upheld the Tribunal's decision, stating that the provisions of section 80VV apply even to fees paid for preparation of statements and schedules annexed to income-tax returns. The question was answered in the affirmative against the assessee.

2. Regarding the value of the benefit derived by the employee substituted for the expenditure incurred by the assessee in assessing disallowance under section 40A(5) of the Act, the court referred to a previous judgment involving a similar issue. The court held that the value of the benefit derived by the employee could not be substituted for the expenditure incurred by the assessee. The decision was based on previous rulings and upheld the Tribunal's order, answering the question in the negative against the assessee.

3. The court addressed the issue of whether surtax paid by the assessee could be claimed as a deduction while computing the total income under the Income-tax Act. Referring to a previous decision, the court stated that such a deduction is not possible. Citing a specific case, the court answered the question in the negative and against the assessee, in line with the decision cited. The judgment was delivered by Judge K. A. Thanikkachalam, with N. V. Balasubramanian also mentioned.