1987 (10) TMI 73 - AT - Income Tax

Issues Involved:
1. Claim for Additional Depreciation under Section 32(1)(iia)
2. Deduction of Agricultural Development Allowance under Section 35C
3. Addition of Unclaimed Credits Written Off
4. Disallowance under Section 40(c)
5. Disallowance of Foreign Tour Expenses
6. Weighted Deduction under Section 35B on Advertisement Expenses
7. Deduction of Excise Duty Liability
8. Deletion of Interest Charged under Section 217

Detailed Analysis:

1. Claim for Additional Depreciation under Section 32(1)(iia)
The assessee claimed additional depreciation on additions to dies and electrical installations in the factory. The Commissioner (A) partially accepted the claim, noting that additional depreciation is only available for assets installed after March 31, 1980. The Commissioner (A) directed the ITO to verify if the assets were installed after this date. The Tribunal upheld the Commissioner (A)'s decision, stating that the Commissioner (A) should have decided the matter himself instead of remitting it back to the ITO.

2. Deduction of Agricultural Development Allowance under Section 35C
The assessee claimed an agricultural development allowance for expenses incurred in providing services to farmers growing Mochi-rice. The ITO disallowed the claim, stating that the expenditure did not meet the criteria under Section 35C. The Commissioner (A) allowed the principal amount as business expenditure but denied the weighted deduction under Section 35C due to lack of evidence. The Tribunal found that the assessee was entitled to both the deduction of Rs. 57,792 as revenue expenditure and the weighted deduction under Section 35C, directing the ITO to modify the assessment accordingly.

3. Addition of Unclaimed Credits Written Off
The assessee claimed a deduction for unclaimed credits written off. The ITO and Commissioner (A) disallowed the claim, treating the amounts as taxable income under Section 41(1). The Tribunal disagreed, citing precedents and legal commentaries, and deleted the addition of Rs. 16,997 from the total income.

4. Disallowance under Section 40(c)
The ITO disallowed certain amounts under Section 40(c) related to remuneration and benefits provided to directors. The Commissioner (A) upheld the disallowance, noting that the provisions of Section 40(c) were applicable. The Tribunal, however, directed the ITO to reconsider the disallowance under the provisions of Section 40A(5), which were deemed more appropriate for employee-directors.

5. Disallowance of Foreign Tour Expenses
The ITO disallowed a portion of foreign tour expenses, treating them as capital expenditure related to the expansion project. The Commissioner (A) allowed a portion of the expenses as revenue expenditure but confirmed the rest as capital expenditure. The Tribunal upheld the Commissioner (A)'s decision, directing the ITO to allow investment allowance/depreciation on the capitalized portion.

6. Weighted Deduction under Section 35B on Advertisement Expenses
The assessee's claim for weighted deduction on advertisement expenses was not pressed during the hearing. The Tribunal upheld the Commissioner (A)'s decision to disallow the claim.

7. Deduction of Excise Duty Liability
The Tribunal directed the ITO to accept the assessee's claim for deduction of excise duty liability of Rs. 41,77,983, following the precedent set in the assessee's own case for previous assessment years.

8. Deletion of Interest Charged under Section 217
The Commissioner (A) deleted the interest charged under Section 217, stating that the assessee was not liable to file an estimate for advance-tax under Section 209A due to the absence of positive income in previous assessments. The Tribunal upheld this decision, citing a relevant High Court ruling.

Conclusion:
The Tribunal's judgment addressed multiple issues, providing relief to the assessee on several counts, including additional depreciation, agricultural development allowance, unclaimed credits, and excise duty liability. The Tribunal also directed the ITO to reconsider certain disallowances under the appropriate sections and allowed the assessee to claim investment allowance/depreciation on capitalized foreign tour expenses. The Revenue's appeal was dismissed in its entirety.

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