1988 (12) TMI 7 - HC - Income Tax

Business Expenditure Depreciation Developement Rebate Disallowance Entertainment Expenditure Expenditure On A Public Issue Installed Perquisite Plant And Machinery Reference Remuneration Roads

Summary

Issues:
1. Cash allowances and their treatment under specific sections of the Income-tax Act for different assessment years.
2. Entitlement to depreciation on the cost of roads as part of factory buildings.
3. Entitlement to development rebate for durable machine tools.
4. Allowance of business expenditure for lunches and dinners.
5. Deductibility of public issue expenses as revenue expenditure.

Analysis:

1. The first and second questions raised by the Revenue regarding the treatment of cash allowances paid to employees under specific sections of the Income-tax Act were answered in favor of the assessee based on precedents cited in the judgments of CIT v. Indokem Pvt. Ltd. and CIT v. Colour-Chem Ltd. The court ruled that the cash allowances were outside the purview of the mentioned sections for the respective assessment years.

2. The third question raised by the Revenue regarding the entitlement to depreciation on the cost of roads was also decided in favor of the assessee. The court held that the assessee was entitled to depreciation on the cost of roads as part of "building" based on the interpretation of relevant laws and precedents.

3. The fourth question raised by the Revenue concerned the entitlement to development rebate for durable machine tools. The court noted that the Income-tax Rules considered such tools as plant and machinery. The Tribunal's decision to allow development rebate on these tools was upheld, emphasizing that the tools need not be physically installed to qualify as plant and machinery.

4. The first question raised by the assessee related to the disallowance of entertainment expenses. The court upheld the Tribunal's decision that the lunches and dinners provided to clients and business associates constituted entertainment expenses. The court deferred to the Tribunal's factual findings on the nature of these expenses.

5. The second question raised by the assessee pertained to the deductibility of public issue expenses as revenue expenditure. The court, based on precedent from Bombay Burmah Trading Corporation Ltd. v. CIT, ruled in favor of the Revenue, stating that such expenses were not deductible as revenue expenditure.

In conclusion, the court ruled on various issues related to income tax treatment, depreciation, development rebate, and deductibility of expenses, providing detailed reasoning and referencing relevant legal precedents to support its decisions.