1985 (12) TMI 11 - HC - Income Tax

Summary

Issues Involved:
The judgment addresses the following questions of law:
1. Whether amounts spent on repairs of machinery and bhatta and chimneys were allowable as business expenditure.
2. Whether a provision made for overtime wages could be allowed as a deduction in computing the total income.

Issue 1 - Repairs of Machinery:
The assessee, a limited company engaged in manufacturing and sale of goods, claimed deductions for repairs to machinery and provision for overtime wages. However, the Income-tax Officer, Commissioner (Appeals), and Tribunal rejected these claims. The Tribunal found that the manufacturing business had been closed in 1967, and during the relevant year, only the sale of previously manufactured goods took place. The Tribunal held that no deduction for machinery repairs could be granted under section 31 of the Income-tax Act, 1961. The assessee argued for allowance under section 37(1), contending that any expenditure for business purposes could be claimed. However, the court ruled that for section 37(1) to apply, the expenditure must have a nexus with the business carried out during the relevant period. As the repairs were unrelated to the current business activity of selling manufactured goods, the deduction was disallowed.

Issue 2 - Provision for Overtime Wages:
Regarding the provision made for overtime wages, the Tribunal found that the basis for the claim was the workers' demand, which was not substantiated to have arisen during the relevant year through any legal means. As the demand for overtime wages was not proven to be a liability under statute, contract, or tribunal adjudication during the relevant period, the deduction was deemed unsupported. Consequently, the Tribunal's decision to disallow this deduction was upheld. The judgment concluded that the amounts spent on repairs and the provision for overtime wages were not allowable as business expenditure, ruling in favor of the Revenue. The Revenue was awarded costs from the assessee, with counsel's fee set at Rs. 200, if certified.