2012 (4) TMI 809 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance under the head Misc. expenses.
2. Investment in building.
3. Disallowance under the head Penalty.
4. Deduction u/s 80G.

Summary:

1. Disallowance under the head Misc. expenses:
The Revenue challenged the CIT(A)'s decision to allow relief on disallowance of Rs. 10,00,000/- under Misc. expenses, arguing it was not wholly and exclusively for business purposes and was capital expenditure. The assessee, a manufacturer of agricultural implements, paid the amount to State Bank of Indore to lift a ban on financing Standard-make tractors, which was affecting sales. The CIT(A) allowed the claim u/s 37(1) of the Income Tax Act, 1961, stating the payment was not a penalty but a business necessity. The Tribunal upheld this decision, noting the expenditure met the conditions of u/s 37(1) and was incurred for commercial expediency.

2. Investment in building:
The Revenue contested the CIT(A)'s decision to allow relief on the difference in investment in building valuation determined by the District Valuation Officer (DVO). The CIT(A) observed that differences up to 10%-15% should be ignored, noting the difference in this case was only 1.14%. The Tribunal upheld this view, referencing the Hon'ble Patna High Court's decision in Bimla Singh v CIT, which supports ignoring minor valuation differences.

3. Disallowance under the head Penalty:
The Revenue appealed against the CIT(A)'s deletion of disallowance of Rs. 1,43,324/- paid to J&K Sales Tax Authorities, which the Assessing Officer treated as a penalty. The assessee argued the amount was sales tax, not a penalty, supported by a challan showing the payment as tax. The Tribunal upheld the CIT(A)'s decision, finding no evidence to contradict the assessee's claim.

4. Deduction u/s 80G:
The assessee's Cross Objection challenged the disallowance of Rs. 30,000/- u/s 80G for lack of evidence of payment to Red Cross. Both lower authorities and the Tribunal found no supporting evidence was provided, and the assessee did not submit additional evidence at this stage. Consequently, the claim was disallowed.

Conclusion:
The appeal of the Revenue and the Cross Objection of the assessee were dismissed.