2013 (7) TMI 262 - HC - Income Tax

Disallowance on expenses - Tribunal deleted - Held that - issue involved stood covered in favour of the assessee by the decision of the Tribunal in assessee s own case in I.T.A. No.3232/Ahd/1996 - Same was followed in assessee s own case in I.T.A. No.936/Ahd/1999 for the Assessment Year 1992-93 - 2006 (8) TMI 519 - GUJARAT HIGH COURT was preferred by the Revenue, but the same was withdrawn for the purpose of filing miscellaneous application for correction of the alleged apparent mistake committed by the Tribunal - Appeal dismissed. Disallowance of expenditure on salary - Held that - if any staff is deployed at the residence of the Chairman for the purpose of looking after basic requirements such as cleaning of the house, attending to official guests, receiving telephones and such other sundry responsibilities, the same would fall within the description expended wholly for the purpose of business. However, amount involved is not very significant. We would, therefore, like to examine such a question in an appropriate appeal proceedings.

Summary

Issues:
1. Disallowance of expenses on new lignite project treated as capital in nature
2. Disallowance of expenses towards salary and perquisites of staff at Chairman's residence
3. Disallowance of expenses on obsolete stock/stores without evidence

Issue 1: Disallowance of expenses on new lignite project
The Revenue appealed against the Tribunal's decision to delete the disallowance of expenses on a new lignite project treated as capital in nature. The Tribunal's decision was based on previous rulings in favor of the assessee. The Revenue's appeal was withdrawn for correcting an alleged mistake. The High Court upheld the Tribunal's decision, stating that the dismissal of the appeal does not prevent the Revenue from filing a miscellaneous application.

Issue 2: Disallowance of expenses towards salary and perquisites
The Revenue challenged the deletion of disallowance of expenses amounting to Rs.1.32 lakhs towards salary and perquisites of staff at the Chairman's residence. The High Court opined that if staff at the Chairman's residence catered to business-related tasks, the expenses could be considered as business-related. However, the amount in question was not significant. The High Court decided to examine this issue in future appeal proceedings.

Issue 3: Disallowance of expenses on obsolete stock/stores
The Revenue argued against the deletion of disallowance of Rs.66,61,177 out of Rs.88,51,569 on account of obsolete stock/stores due to lack of evidence. The High Court noted that the Tribunal had rejected the assessee's appeal against the disallowance confirmed by the Commissioner (Appeals). As a result, the High Court dismissed the Tax Appeal.

In conclusion, the High Court upheld the Tribunal's decision on the disallowance of expenses on the new lignite project, deferred the examination of expenses towards salary and perquisites, and dismissed the appeal regarding the disallowance of expenses on obsolete stock/stores due to lack of evidence.