2013 (9) TMI 808 - HC - Income Tax

Allowability of guest house expenses Held that - Expense incurred for the purposes of guest house is not the business expenses and is not liable to deduction Reliance has been placed upon the Apex Court judgment in Britania Industries Ltd. v. Commissioner of Income Tax & Anr., Apex Court in Britania Industries Ltd. v. Commissioner of Income Tax & Anr., 2005 (10) TMI 30 - SUPREME Court

Summary

Issues involved:
1. Disallowance of Production Incentive Bonus
2. Classification of Tubewell as Plant
3. Allowance of Molasses Reserve Fund
4. Addition on account of under valuation of closing stock
5. Restoration of under valuation of closing stock issue for examination
6. Justification of deletion of guest house expenses

Analysis:

1. Disallowance of Production Incentive Bonus:
The Court noted that certain substantial questions of law were framed by the Commissioner of Income Tax, Moradabad. However, it was observed that some questions had already been decided in favor of the assessee in previous cases. The Court referred to specific judgments where similar issues had been resolved in favor of the assessee, leading to the admission of the appeal on the remaining substantial questions.

2. Classification of Tubewell as Plant:
The Court acknowledged that the issue of whether Tubewell should be classified as a Plant had been addressed in previous judgments, resulting in a decision in favor of the assessee. Consequently, the appeal was admitted on other substantial questions framed in the memo of appeal.

3. Allowance of Molasses Reserve Fund:
The Court referenced a decision where the claim of Molasses Reserve Fund had been decided in favor of the assessee. This led to the admission of the appeal on certain remaining substantial questions for further consideration.

4. Addition on account of under valuation of closing stock:
In the case of under valuation of closing stock, the Court examined the findings recorded by the ITAT and the CIT (A). It was noted that the consistent method of valuation adopted by the assessee was upheld, with no errors identified in the assessment method. As a result, the Court did not find it necessary to consider the specific questions related to the under valuation of closing stock.

5. Restoration of under valuation of closing stock issue for examination:
The Court mentioned that the issue of under valuation of closing stock had been restored for fresh examination in certain assessment years. However, since the consistent valuation method was accepted across various assessment years, the Court did not find it essential to delve into this issue further.

6. Justification of deletion of guest house expenses:
Regarding the deletion of guest house expenses, the Court referred to a Supreme Court judgment where it was held that such expenses are not considered business expenditure and are not eligible for deduction. Consequently, the Court decided this issue in favor of the revenue and against the assessee.

In conclusion, the Court disposed of the income tax appeal based on the detailed analysis and decisions made on the various issues raised in the case.