2000 (2) TMI 184 - AT - Income Tax

Summary

Issues Involved:
1. Computation of carry forward of unabsorbed depreciation and unabsorbed investment allowance u/s 115J.
2. Disallowance of payments to Club.
3. Computation of deduction u/s 80-I.
4. Disallowance under Rule 6B in respect of presentation articles.
5. Adjustment of depreciation for computing book profits u/s 115J.
6. Disallowance of travelling expenses.
7. Treatment of expenses as technical know-how fees u/s 35AB.

Summary:

1. Computation of Carry Forward of Unabsorbed Depreciation and Unabsorbed Investment Allowance u/s 115J:
The core issue was the interpretation of provisions u/s 115J(1) and 115J(2) regarding the computation of carry forward of unabsorbed depreciation and investment allowance. The Tribunal held that the determination of carry forward amounts should be governed by the normal provisions of the Act, unaffected by the deeming fiction of 30% book profit as total income u/s 115J(1). The Tribunal upheld the Assessing Officer's view that only such amounts of unabsorbed depreciation and allowances determined under regular provisions could be carried forward, rejecting the assessee's claim for carrying forward the entire unabsorbed amounts unchanged. The appeals of the Revenue on this issue were allowed.

2. Disallowance of Payments to Club:
The assessee's payments to Cricket Club of India and Royal Bombay Yacht Club were disallowed by the Assessing Officer as non-business expenditure. The Tribunal, referencing the Gujarat High Court decision, allowed these expenses as business expenditure and deleted the disallowance of Rs. 9,485.

3. Computation of Deduction u/s 80-I:
The assessee's claim for deduction u/s 80-I on interest from short-term deposits and service charges was denied by the Assessing Officer, which was upheld by the Tribunal. The Tribunal noted that the income from these sources did not have a direct nexus with the industrial undertaking, following the Supreme Court's interpretation of "derived from."

4. Disallowance under Rule 6B in Respect of Presentation Articles:
The CIT(A) deleted the disallowances made under Rule 6B for presentation articles, concluding they were not meant for advertisement. The Tribunal upheld this finding, dismissing the Revenue's appeals on this ground.

5. Adjustment of Depreciation for Computing Book Profits u/s 115J:
The Assessing Officer added Rs. 3,87,438 to the book profits, claiming the profit and loss account was not prepared per Schedule VI of the Companies Act. The Tribunal upheld the CIT(A)'s deletion of this adjustment, following earlier Tribunal decisions.

6. Disallowance of Travelling Expenses:
The CIT(A) deleted the disallowance of Rs. 16,674 made by the Assessing Officer under Rule 6D, following the Bombay High Court's decision that total expenditure on traveling should be considered. The Tribunal upheld this deletion.

7. Treatment of Expenses as Technical Know-How Fees u/s 35AB:
The Assessing Officer treated technical assistance fees as technical know-how fees and applied section 35AB, allowing only 1/6th of the expenses. The CIT(A) deleted the disallowance, and the Tribunal upheld this decision, noting that the expenses were not in the nature of acquisition of technical know-how.

Conclusion:
The appeals of the assessee for assessment years 1988-89 and 1989-90 were dismissed, and for assessment year 1990-91 were partly allowed. The appeals of the Revenue for the three years were partly allowed.