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Issues:
1. Interpretation of sales of coke as distribution of assets on dissolution of a firm. 2. Validity of deductions under section 40A(3) and 40A(2)(a) of the Income-tax Act, 1961. 3. Disallowance of entertainment expenses incurred by the firm. Interpretation of sales of coke as distribution of assets on dissolution of a firm: The case involved the interpretation of sales of coke made to partners of a dissolved firm as a distribution of assets rather than a sale transaction. The Income-tax Officer and Commissioner of Income-tax (Appeals) had added an amount to the firm's income based on the valuation of the coke sold to partners. However, the Tribunal ruled that the distribution of remaining coke among partners was not a sale but a distribution of assets, leading to the deletion of the additional amount. The Tribunal considered this issue a question of fact, not law, and only referred a related question to the High Court for decision. Validity of deductions under section 40A(3) and 40A(2)(a) of the Income-tax Act, 1961: The Tribunal allowed deductions disallowed by the lower authorities under sections 40A(3) and 40A(2)(a) of the Income-tax Act, 1961. These deductions related to payments exceeding Rs. 2,500 made in cash instead of by crossed cheque or bank draft. The Tribunal accepted the assessee's explanation for the cash payments, citing exceptional circumstances such as the absence of banking facilities in the business location. The High Court upheld the Tribunal's decision, emphasizing that the conclusion reached was the only possible one based on the facts presented. Disallowance of entertainment expenses incurred by the firm: The Tribunal deleted the disallowance of Rs. 3,000 claimed by the firm as entertainment expenses for customers and employees. The High Court determined that the deletion of this disallowance was based on factual findings, not legal principles. It concluded that there was no basis to disallow the claimed amount, and thus, it was a question of fact rather than law. The High Court ruled in favor of the assessee on this issue. In conclusion, the High Court dismissed one case and answered the reference against the Department in another, upholding the Tribunal's decisions regarding the interpretation of sales of coke, validity of deductions under sections 40A(3) and 40A(2)(a), and the disallowance of entertainment expenses incurred by the firm. The court emphasized that these issues were primarily factual in nature, and the Tribunal had appropriately dealt with them, leading to the decisions in favor of the assessee.
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