1994 (9) TMI 44 - HC - Income Tax

Accident Insurance, Advance Tax, Business Expenditure, Guest House, Income Tax Act, Investment Allowance, Question Of Law

Summary

Issues involved:
1. Treatment of residential accommodations as guest houses and allowance of expenses.
2. Perquisite status of personal accident insurance premium.
3. Disallowance calculation under rule 6D for total journeys.
4. Disallowance of investment allowance under section 32A.
5. Incorrect charging of interest under section 216.
6. Consideration of expenses under various heads towards employees.

Detailed Analysis:

1. Treatment of residential accommodations as guest houses and allowance of expenses:
The issue revolved around whether certain residential accommodations could be classified as guest houses and if expenses incurred on their maintenance were allowable. The Income-tax Officer disallowed the expenses, citing section 37(4) of the Income-tax Act. However, the Tribunal disagreed, stating that the accommodations were not guest houses. The court rejected the Revenue's request for reference on this issue, citing the rule of res judicata and the binding nature of the Tribunal's decision.

2. Perquisite status of personal accident insurance premium:
The Tribunal had previously held that the insurance premium paid by a company for accident insurance of its directors did not qualify as a perquisite under section 17(1) of the Act. The court referred to a previous decision and dismissed the proposed question as not a statable question of law, considering the established legal position.

3. Disallowance calculation under rule 6D for total journeys:
The Tribunal directed the Income-tax Officer to calculate disallowance under rule 6D based on total journeys undertaken in a year, rather than each journey on a day-to-day basis. Given a similar question had been referred in a previous case, the court directed a reference on this issue for consideration.

4. Disallowance of investment allowance under section 32A:
The Assessing Officer disallowed the investment allowance claimed by the assessee on grounds including lack of evidence on machinery being new and installed during the relevant year. The Tribunal upheld the disallowance, but the court found a question of law on whether the machinery claimed for investment allowance was new, warranting further consideration.

5. Incorrect charging of interest under section 216:
The court acknowledged a previous decision involving a similar issue under section 216 of the Act, which necessitated a reference on this question for legal interpretation.

6. Consideration of expenses under various heads towards employees:
The Tribunal had considered allocating a percentage of expenses under different heads towards employees, which was consistent with previous decisions. Given the factual position and legal precedent, the court found no statable questions of law in these issues, thus rejecting the need for references.

In conclusion, the court directed references on specific issues for further legal scrutiny, emphasizing the importance of legal interpretations and established principles in tax matters.