2000 (6) TMI 115 - AT - Income Tax

Issues Involved:
1. Disallowance of expenses related to transit home and guest house.
2. Disallowance under Section 37(3A).
3. Disallowance of provisions for bonus.
4. Alleged undervaluation in stores.
5. Disallowance under Section 40A(5).
6. Disallowance under Section 43B.
7. Depreciation on temple, Pujari quarter, mess for workers, and school.
8. Addition under Rule 6D.
9. Disallowance of retainership fees under Section 80VV.
10. Depreciation on trolly.
11. Unexplained investment in construction.
12. Addition due to fall in gross profit rate.

Detailed Analysis:

1. Disallowance of Expenses Related to Transit Home and Guest House:
The assessee claimed Rs. 79,936 for maintenance of the transit house, Rs. 4,390 as depreciation, and Rs. 10,803 recovered from persons using the transit house. The AO disallowed Rs. 25,000 for electricity, water, and gas expenses and Rs. 71,806 for maintenance. The CIT(A) reduced the disallowance to Rs. 12,000 and deleted Rs. 20,000 for the Calcutta guest house. The Tribunal confirmed the CIT(A)'s deletion of Rs. 20,000 and reduced the disallowance for electricity, water, and gas to Rs. 8,000.

2. Disallowance under Section 37(3A):
The AO added Rs. 50,000 for the maintenance and running of motor cars, which was restricted to Rs. 30,000 by the CIT(A). The Tribunal, following its previous decision, deleted the addition, concluding that no disallowance was warranted.

3. Disallowance of Provisions for Bonus:
The AO disallowed Rs. 68,912 for bonus provisions payable to workers earning more than Rs. 1,000 per month. The CIT(A) did not decide on this ground, and the Tribunal directed the CIT(A) to decide the issue.

4. Alleged Undervaluation in Stores:
The CIT(A) did not discuss the issue of Rs. 5,021 for alleged undervaluation in stores. The Tribunal restored the matter to the CIT(A) for a decision.

5. Disallowance under Section 40A(5):
The AO disallowed Rs. 36,061 under Section 40A(5). The CIT(A) did not discuss this issue, and the Tribunal restored the matter to the CIT(A) for a decision.

6. Disallowance under Section 43B:
The AO disallowed Rs. 2,05,429 for Central sales tax, U.P. sales tax, additional tax on U.P. sales tax, and gratuity payable. The CIT(A) upheld the disallowance. The Tribunal, following the Supreme Court's decision in Allied Motors (P) Ltd. vs. CIT, directed the AO to delete the disallowance for sales tax and restored the issue of ESI and gratuity to the AO for a fresh decision.

7. Depreciation on Temple, Pujari Quarter, Mess for Workers, and School:
The AO disallowed initial depreciation for the mess and school, which was sustained by the CIT(A). The CIT(A) did not decide on the temple and Pujari quarters. The Tribunal, following previous decisions, allowed depreciation and initial depreciation for the temple, Pujari quarters, mess, and school.

8. Addition under Rule 6D:
The AO made an ad hoc disallowance of Rs. 1 lakh for travel expenses, which was deleted by the CIT(A). The Tribunal upheld the CIT(A)'s deletion, following its previous decision.

9. Disallowance of Retainership Fees under Section 80VV:
The AO disallowed Rs. 18,000 for retainership fees under Section 80VV. The CIT(A) deleted the disallowance. The Tribunal upheld the CIT(A)'s deletion, following previous decisions and case law.

10. Depreciation on Trolly:
The AO allowed 15% depreciation on trollies, while the CIT(A) allowed 100% depreciation. The Tribunal upheld the CIT(A)'s decision, considering the trollies as plant and machinery.

11. Unexplained Investment in Construction:
The AO added Rs. 6,53,715 for unexplained investment in construction based on the Departmental valuer's report. The CIT(A) deleted the addition, noting that the AO did not point out defects in the books of account. The Tribunal upheld the CIT(A)'s deletion, citing the invalidity of the reference to the Departmental valuer without pointing out defects.

12. Addition Due to Fall in Gross Profit Rate:
The AO added Rs. 6 lakhs for the fall in the gross profit rate due to lower scrap sales. The CIT(A) deleted the addition, noting that the sales were made through sealed tenders and no discrepancies were found in the books. The Tribunal upheld the CIT(A)'s deletion, noting that the addition was based on guesswork and unsupported by evidence.

Conclusion:
The Tribunal's judgment addressed multiple issues related to disallowances, depreciation, and additions, often relying on previous decisions and case law to reach its conclusions. The judgment emphasized the importance of proper documentation and the invalidity of ad hoc disallowances without substantial evidence.

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