1993 (4) TMI 323 - AT - Income Tax

Summary

Issues: Disallowance of consultancy charges, disallowance of advertisement expenses, addition of sales-tax liability, disallowance of foreign tour expenses

Consultancy Charges:
The issue pertains to the disallowance of consultancy charges amounting to &8377; 28,000 incurred by the assessee for establishing a laboratory. The assessee argued for the allowance of this expenditure as a revenue expenditure or, alternatively, for depreciation to be granted. The Tribunal acknowledged the capital nature of the expenditure but directed the grant of depreciation as per rules on the said amount to the assessee.

Advertisement Expenses:
The dispute revolves around the disallowance of &8377; 8,451 out of advertisement expenses. The assessee contended that these charges were for advertisements published in various souvenirs and magazines, citing support from a Circular of the Board and a judgment of the Bombay High Court. The Tribunal, after reviewing the details of the advertisement expenses and the supporting circular, directed the ITO to grant deduction for the said expenditure.

Sales-Tax Liability:
The issue concerns the addition of &8377; 51,912 in sales-tax liability. The Tribunal noted that the outstanding sales-tax liability was paid before the prescribed time under the law, referencing a Tribunal decision in favor of the assessee. Consequently, the Tribunal directed the deletion of the addition in sales-tax liability.

Foreign Tour Expenses:
The final contention involved the disallowance of &8377; 20,000 from foreign tour expenses. The assessee argued against the ad hoc disallowance, emphasizing that the foreign tours were for business purposes and no personal expenses were included. The Tribunal, after examining the details of the foreign traveling expenses and tour reports, found no justification for the ad hoc disallowance. Therefore, the Tribunal directed the ITO to delete the entire disallowance of &8377; 20,000.

In conclusion, the Tribunal partially allowed the appeal, directing the grant of depreciation on consultancy charges, deduction for advertisement expenses, deletion of sales-tax liability addition, and the removal of the disallowance on foreign tour expenses.