1986 (1) TMI 75 - HC - Income Tax

Summary

Issues involved:
1. Deductibility of payment to Indian National Congress
2. Tax exemption on sale proceeds of trees at Barhani
3. Permissibility of deduction for expenditure on electric fittings
4. Nature of expenditure on purchase of new furniture and racks

Deductibility of payment to Indian National Congress:
The court referred to a previous decision which concluded that the payment made to the Indian National Congress was not a permissible deduction under the Income-tax Act, 1961. As this issue was already settled, the court did not delve into the details of this matter.

Tax exemption on sale proceeds of trees at Barhani:
The assessee sold trees at the Barhani factory site and claimed exemption under section 10(3) of the Income-tax Act. However, the Tribunal held that the assessee was liable to pay tax on any capital gains realized from the sale. The court did not provide a specific answer to this question as the assessee did not press for it due to the deduction allowed by the Tribunal.

Permissibility of deduction for expenditure on electric fittings:
The assessee claimed expenditure on furniture, racks, and electric fittings at retail cloth depots. The Tribunal restricted the deduction for furniture replacement to old depots and disallowed the expenditure on electric fittings for new depots as capital expenditure. The court agreed with the Tribunal's decision, stating that the expenditure on furniture and racks, as well as electric fittings for new depots, was of a capital nature based on the limited facts presented.

Nature of expenditure on purchase of new furniture and racks:
The Tribunal deemed the expenditure on new furniture and racks for replacement in existing retail depots as capital expenditure. The court upheld this decision, noting that such expenditure is typically of a capital nature. The court allowed the assessee the opportunity to present additional facts in the future to support a different contention. The third question was answered affirmatively in favor of the Tribunal's decision.