1995 (12) TMI 63 - HC - Income Tax

Summary

Issues:
1. Exemption under section 10(26B) of the Income-tax Act, 1961
2. Exemption under section 10(20A) of the Income-tax Act, 1961
3. Relief under section 80J of the Income-tax Act, 1961
4. Disallowance of expenditure of Rs. 15,872
5. Nature of the expenditure amounting to Rs. 15,872

Analysis:

1. Exemption under section 10(26B) of the Income-tax Act, 1961:
The court had previously decided that the assessee is entitled to exemption under clause (26B) of section 10 of the Income-tax Act, 1961, only concerning income related to housing schemes for the scheduled castes. The exemption does not extend to activities covered by other objects in the memorandum of association. Therefore, question 1 was partly answered in favor of the assessee.

2. Exemption under section 10(20A) of the Income-tax Act, 1961:
The senior advocate for the assessee did not press questions related to this exemption, leading to those questions being returned unanswered. Hence, there is no determination regarding the entitlement to exemption under section 10(20A) in this judgment.

3. Relief under section 80J of the Income-tax Act, 1961:
Similar to the exemption under section 10(20A), the advocate for the assessee did not pursue this claim, resulting in those questions being unanswered. The judgment does not provide any analysis or decision on the entitlement to relief under section 80J.

4. Disallowance of expenditure of Rs. 15,872:
The expenditure in question was for purchasing wall-to-wall carpet for office use. The authorities disallowed the deduction, considering it as capital expenditure due to the enduring nature of the asset. The court upheld this decision, stating that not all enduring benefits lead to capital expenditure. In this case, the expenditure did not directly relate to business turnover or profits, justifying its classification as capital expenditure. Therefore, questions 4 and 5 were answered against the assessee.

5. Nature of the expenditure amounting to Rs. 15,872:
The court determined that the expenditure on the carpet was rightly treated as capital expenditure, as it did not contribute to enhancing, preserving, or protecting business turnover or profits. The enduring benefit obtained from the carpet did not alter the nature of the expenditure, leading to the conclusion that it was rightly categorized as capital expenditure.