1993 (6) TMI 3 - HC - Income Tax

Advance Tax, Assessed Tax, Attributable To, Business Expenditure, Concessional Rate, Depreciation Actually Allowed, Income Tax Rules, Purchase Price, Rent-free Accommodation, Waiver Of Interest, Written Down Value

Summary

Issues:
1. Interpretation of Section 256(1) of the Income-tax Act, 1961 regarding waiver of interest under rule 40(1) of the Income-tax Rules, 1962.
2. Justification of waiver of interest under rule 40(5) and appealability of refusal to waive interest.
3. Evaluation of perquisite of rent-free accommodation under rule 3 of the Income-tax Rules for disallowance under section 40(c)(iii) of the Act.
4. Allowance of depreciation on buildings and machineries based on written down value for the assessment year 1966-67.

Analysis:
1. The judgment addresses the interpretation of Section 256(1) of the Income-tax Act, 1961, focusing on the waiver of interest under rule 40(1) of the Income-tax Rules, 1962. The court examined the provisions of Section 215, which allows for charging interest at the time of regular assessment if advance tax falls short of the assessed tax by more than 25 percent. The court analyzed the discretion of the Income-tax Officer to reduce or waive interest under Section 215(4), as per the circumstances prescribed in rule 40 of the Income-tax Rules. The court emphasized that rule 40(1) allows for waiver or reduction of interest when the assessment is completed more than one year after the return submission, with no requirement to levy interest for the first year. The court concluded that the Tribunal's approach in interpreting the rule was correct, granting the benefit of doubt to the assessee.

2. Regarding the justification of waiver of interest under rule 40(5) and the appealability of refusal to waive interest, the court did not delve into this issue as it was not necessary due to the resolution of the first question in favor of the assessee.

3. The court addressed the evaluation of the perquisite of rent-free accommodation under rule 3 of the Income-tax Rules for disallowance under section 40(c)(iii) of the Act. The court ruled against the assessee, citing a previous decision in the case of Bombay Burmah Trading Corporation Ltd. v. CIT [1984] 145 ITR 793. The judgment favored the Revenue in this aspect.

4. Lastly, the judgment considered the allowance of depreciation on buildings and machineries based on the written down value for the assessment year 1966-67. Citing the decision in the case of CIT v. Bennet Coleman and Co. Ltd. [1989] 177 ITR 523, the court ruled in favor of the assessee in this regard. The judgment answered the respective questions accordingly, with no order as to costs being issued.