1985 (12) TMI 67 - AT - Income Tax

Issues Involved:
1. Disallowance of commission paid u/s 40A.
2. Disallowance of car expenses.
3. Disallowance of bonus paid to directors.
4. Disallowance of bank guarantee commission.
5. Disallowance of public welfare scheme expenditure.
6. Disallowance of miscellaneous expenditure.
7. Disallowance of depreciation for second and third shifts.
8. Disallowance of incentive bonus paid to workers and staff.
9. Disallowance of commission paid for past year.
10. Disallowance of bonus payment to an employee.

Summary:

1. Disallowance of commission paid u/s 40A:
The ITO disallowed Rs. 22,326 commission paid to Anand Dyes Corpn., Bombay, citing excessive payment compared to others and Rs. 17,458 as liability of the past year. The Commissioner (Appeals) upheld the disallowance, noting lack of justification for the commission rate. The Tribunal, referencing its earlier decision for the assessment year 1979-80, held that the approval by the Company Law Board should be given due weight and deleted the disallowance.

2. Disallowance of car expenses:
The ITO disallowed Rs. 5,000 for personal use by directors. The Tribunal, following its previous decision, deleted the disallowance.

3. Disallowance of bonus paid to directors:
The ITO disallowed Rs. 16,800 paid as bonus to directors. The Tribunal, following its earlier decision, deleted the disallowance.

4. Disallowance of bank guarantee commission:
The ITO disallowed Rs. 45,000 paid as bank guarantee commission to directors, citing lack of necessity. The Tribunal found no justification for disallowance, noting past practice and risk undertaken by directors, and deleted the disallowance.

5. Disallowance of public welfare scheme expenditure:
The ITO disallowed Rs. 1,000 spent on public welfare, considering it not for business purposes. The Tribunal allowed the expenditure, referencing the need for environmental control and pollution management.

6. Disallowance of miscellaneous expenditure:
The ITO disallowed Rs. 3,214 for miscellaneous expenses. The Tribunal allowed the expenditure for the assessment year 1980-81, noting it was for a statue in memory of the company's founder and was business-related.

7. Disallowance of depreciation for second and third shifts:
The ITO disallowed Rs. 18,000 for depreciation due to lack of details. The Tribunal allowed the claim, directing the ITO to verify arithmetical accuracy.

8. Disallowance of incentive bonus paid to workers and staff:
The ITO disallowed Rs. 34,360 paid as incentive bonus, citing excess payment under the Bonus Act. The Tribunal allowed the claim, noting the resolution passed by the directors and increased production.

9. Disallowance of commission paid for past year:
The ITO disallowed Rs. 17,458 as it pertained to the past year. The Tribunal allowed the claim, referencing the Supreme Court decision in Nonsuch Tea Estate Ltd. v. CIT.

10. Disallowance of bonus payment to an employee:
The ITO disallowed Rs. 4,400 paid to Mr. Bhurabhai Desai. The Tribunal allowed the claim, following its earlier decision for directors' bonus.

Conclusion:
The Tribunal allowed the appeals for the assessment year 1980-81 in full and for the assessment year 1981-82 in part, directing the ITO to pass appropriate orders in accordance with law.

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