1998 (8) TMI 619 - AT - Income Tax

Summary

Issues Involved:

1. Prima facie addition of Rs. 38,219 to the returned income.
2. Deduction of Rs. 32,000 for expenses incurred to earn interest income.
3. Rebate on agricultural income of Rs. 54,000.

Issue-wise Detailed Analysis:

1. Prima Facie Addition of Rs. 38,219 to the Returned Income:

The assessee, an individual aged 70, filed an income tax return for the assessment year 1990-91, disclosing a business income, capital gains, income from other sources, and agricultural income. The return showed an income of Rs. 49,110 and agricultural income of Rs. 54,000. However, an intimation under section 143(1)(a) determined the income at Rs. 87,329, adding Rs. 38,219 as interest income from Kalpataru Enterprises and Suvidha Builders. The assessee contended that this amount was already included in the income from other sources and that a double addition of Rs. 6,219 had occurred. Despite rectificatory letters, the rectification petition was rejected by the ITO, and the DC(A) upheld the addition, stating that the expenses deducted for earning this income were not justified.

2. Deduction of Rs. 32,000 for Expenses Incurred to Earn Interest Income:

The assessee claimed that expenses totaling Rs. 32,000 were incurred to earn an interest income of Rs. 39,349, which included salaries, conveyance, professional fees, telephone expenses, and sundry expenses. The DC(A) held that these expenses did not pertain to the income earned under the head "Other sources" and dismissed the appeal. Upon further appeal, it was determined that the assessee failed to provide sufficient evidence to justify these expenses. The Tribunal allowed only a reasonable sum of Rs. 3,000 to be deducted while computing the income from other sources, rejecting the claim for Rs. 32,000.

3. Rebate on Agricultural Income of Rs. 54,000:

The assessee raised additional grounds in the second appeal, claiming that a rebate of Rs. 19,116 on agricultural income of Rs. 54,000 was not granted. The Tribunal considered the CBDT's Circular No. 126, which explains the scheme for partially integrated taxation on non-agricultural income with agricultural income. According to the circular, agricultural income is added to the total income for rate purposes, and the method for calculating the rebate was outlined. The Tribunal admitted the additional grounds and directed that the rebate of Rs. 19,116 be allowed, reducing the tax liability accordingly.

Conclusion:

The appeal was partly allowed. The Tribunal upheld the DC(A)'s decision to reject the full deduction of Rs. 32,000 for expenses incurred to earn interest income, allowing only Rs. 3,000. However, the Tribunal admitted the additional grounds regarding the rebate on agricultural income and directed that a rebate of Rs. 19,116 be granted, thereby reducing the tax demand.