1989 (10) TMI 5 - HC - Income Tax

Summary

Issues:
1. Whether conditional subsidy received under a housing scheme forms part of actual cost for depreciation deduction.
2. Whether messing expenses for providing meals at a guest house are allowable as deduction under section 37.
3. Whether expenses incurred for providing tea, cold drinks, etc., to constituents visiting business premises are allowable as deduction under section 37.

Analysis:

Issue 1:
The Tribunal had to decide if the conditional subsidy received by the assessee under a housing scheme should be considered as part of the actual cost for claiming depreciation deduction. The Income-tax authorities held that the subsidy did not form part of the actual cost and, therefore, depreciation could not be claimed on that amount under section 32 of the Income-tax Act, 1961. The court, based on a previous decision, ruled in favor of the Revenue, stating that the amount received as a subsidy did not qualify as part of the actual cost for depreciation purposes.

Issue 2:
The question arose regarding the allowability of messing expenses incurred by the assessee for providing meals at a guest house under section 37 of the Income-tax Act. The Revenue contended that these expenses were in the nature of entertainment expenses and should not be allowed as a deduction. However, the court disagreed with this argument, stating that the expenses being disallowable under a different subsection of section 37 was not raised or considered by the Tribunal. Therefore, the court ruled in favor of the assessee, allowing the messing expenses as a deduction.

Issue 3:
The third issue involved the deductibility of expenses incurred in providing tea, cold drinks, etc., to constituents visiting the business premises under section 37 of the Income-tax Act. The Revenue argued that these expenses were in the nature of entertainment expenses and should not be allowed as a deduction. The court, following the same reasoning as in issue 2, found that the question of disallowance under a different subsection of section 37 was not raised or considered by the Tribunal. Therefore, the court ruled in favor of the assessee, allowing these expenses as a deduction.

In conclusion, the court answered question 1 against the assessee and in favor of the Revenue, while questions 2 and 3 were answered in favor of the assessee and against the Revenue. No costs were awarded in this judgment.