1988 (12) TMI 132 - AT - Income Tax

Issues Involved:
1. Weighted deduction under Section 35B of the Act.
2. Allowance of water charges in computing income from house property.
3. Inclusion of local conveyance expenses and other actual expenses under Rule 6D of the IT Rules.
4. Allowance of fees paid under Section 80VV of the Act.

Issue-wise Detailed Analysis:

1. Weighted Deduction under Section 35B of the Act:
The first issue pertains to the weighted deduction under Section 35B of the Act granted by the CIT(A) on various items such as Raw/Building Material, Tools/Stores, Rent, and Printing/Stationery in Kuwait, Nepal, and Bhutan. The Revenue argued that the CIT(A) was not justified in accepting the assessee's submissions regarding weighted deduction, citing that the items were in the nature of purchasing and manufacturing expenses ordinarily debitable to the Trading & Manufacturing Account. The Revenue relied on the Tribunal's order in Kwality Textile Associates (P) Ltd. vs. ITO (1988) 24 ITD 454 (Mad). The assessee countered by referring to the Hon'ble Supreme Court's decision in its own Sales-tax matter, asserting that the contracts were indivisible and could not be broken up into a contract for sale of material and a contract for payment for work to be done. The assessee also noted that in previous assessment years, similar claims had been accepted by the Revenue. The Tribunal found considerable force in the assessee's submissions, noting that the amendments made by the Finance (No. 2) Act, 1980, were applicable from the assessment year 1981-82 onwards and thus did not apply to the assessment year 1980-81. The Tribunal upheld the CIT(A)'s order on this point.

2. Allowance of Water Charges in Computing Income from House Property:
The next issue pertains to the allowance of water charges in computing the income from house property. The Revenue argued that the CIT(A)'s order should be reversed, while the assessee pointed out that the CIT(A) had followed the order of his predecessor for the assessment year 1978-79, which had been upheld by the Tribunal. The assessee also highlighted an agreement where it had undertaken to pay all local taxes, including water charges. The Tribunal found no justification to interfere with the CIT(A)'s order and upheld it.

3. Inclusion of Local Conveyance Expenses and Other Actual Expenses under Rule 6D of the IT Rules:
The third issue involves the inclusion of local conveyance expenses and other actual expenses incurred by employees on the conduct of the assessee's business while on tour, as part of the traveling expenses for the purpose of computing the disallowance under Rule 6D of the IT Rules. The Revenue argued for reversing the CIT(A)'s order, while the assessee supported the CIT(A)'s action. The Tribunal found no justification to interfere with the CIT(A)'s order and upheld it.

4. Allowance of Fees Paid under Section 80VV of the Act:
The last issue pertains to the allowance of Rs. 2,500 being the fees paid to Shri Ajay Thakore, which the ITO had disallowed by invoking the provisions of Section 80VV of the Act. The assessee had also appealed against the CIT(A)'s order upholding the disallowance of Rs. 13,000 out of Rs. 15,500. The Tribunal, in a separate order, confirmed the CIT(A)'s order on this point. Consequently, the Tribunal upheld the CIT(A)'s action allowing the deduction of Rs. 2,500.

Conclusion:
In summary, the Tribunal upheld the CIT(A)'s order on all points, dismissing the Revenue's appeal. The Tribunal found considerable merit in the assessee's submissions and noted that the amendments cited by the Revenue were not applicable to the assessment year in question.

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