1987 (8) TMI 128 - AT - Income Tax

Summary

Issues:
1. Valuation of gold and gold ornaments for income tax assessment.
2. Treatment of income disclosed under the voluntary disclosure scheme.
3. Deduction of fine paid by the assessee under the Gold (Control) Act.

Valuation of Gold and Gold Ornaments:
The case involved a firm engaged in money-lending and dealing in silver ornaments, where gold and gold ornaments were seized by Gold Control authorities. The dispute centered around the valuation of these items for income tax assessment. The Income-tax Officer incorrectly valued the gold ornaments at Rs. 531 per 10 gms, ignoring the impurity in the ornaments. The Commissioner of Income-tax (Appeals) correctly estimated an 8% impurity and adjusted the valuation accordingly. The Tribunal upheld this decision, emphasizing that new ornaments have additional charges beyond the gold value, justifying the 8% discount. The Tribunal rejected the assessee's claim of Rs. 400 per 10 grams, affirming the valuation at Rs. 531 per 10 gms.

Treatment of Income Disclosed Under Voluntary Disclosure Scheme:
The Commissioner of Income-tax (Appeals) ruled that only the income disclosed under the voluntary disclosure scheme, amounting to Rs. 25,000 for 635 gms of ornaments, should be excluded from the assessment. The Tribunal upheld this decision, citing Section 8(1) of the Voluntary Disclosure Scheme of Income and Wealth Act, which excludes voluntarily disclosed income from total income. The Tribunal clarified that the weight of ornaments mentioned in the disclosure is irrelevant, as only the disclosed income is to be excluded.

Deduction of Fine Paid Under the Gold (Control) Act:
The firm faced fines totaling Rs. 35,000 under the Gold (Control) Act, which it sought to deduct as business expenses. The Tribunal analyzed precedents and determined that the fines were not allowable deductions under Section 37(1) or Section 28 of the Income-tax Act. The Tribunal highlighted that the fines were related to illegal business activities, and no income from such activities was assessed. Therefore, the fines were not deductible as business expenses. The Tribunal allowed the departmental appeal and dismissed the cross objection.

In conclusion, the Tribunal upheld the valuation of gold and gold ornaments, clarified the treatment of income disclosed under the voluntary scheme, and disallowed the deduction of fines paid under the Gold (Control) Act.