1979 (1) TMI 120 - AT - Income Tax

Summary

Issues:
1. Disallowance of weighted deduction on certain expenses.
2. Disallowance of loss on the sale of an imported car.
3. Disallowance of foreign travelling expenses and weighted deduction under s. 35B.

Issue 1: Disallowance of weighted deduction on certain expenses
The appeals filed by the Revenue were against the order of the AAC allowing weighted deduction under s. 35B of the IT Act, 1961 on items such as commission, salary, bonus, and postage. The ITO had disallowed the deduction on the grounds that the expenditure had been incurred in India. However, the AAC granted relief to the assessee, citing a Special Bench decision in a similar case. The Tribunal upheld the AAC's decision, stating that no interference was necessary, and confirmed the relief granted for both assessment years. Consequently, the departmental appeals were dismissed.

Issue 2: Disallowance of loss on the sale of an imported car
The assessee claimed a loss of Rs. 37,913 on the sale of an imported car, which was disallowed by the ITO and confirmed by the AAC. The Tribunal found that the lower authorities were unjustified in disallowing the claim as the car was a capital asset of the company, and depreciation had been allowed on it. The Tribunal held that the loss was allowable under s. 71(3) of the Act as a short-term capital loss. The order of the AAC disallowing the claim was set aside, and the ITO was directed to allow the loss to be adjusted against the business income.

Issue 3: Disallowance of foreign travelling expenses and weighted deduction under s. 35B
The appeal was filed against the disallowance of Rs. 5,000 from foreign travelling expenses and the denial of weighted deduction under s. 35B for the disallowance. The ITO had disallowed a portion of the foreign and inland travelling expenses, which was confirmed by the AAC. The Tribunal held that the entire expenses on travelling, including lodging and boarding, could not be allowed. The disallowance in respect of lodging and boarding was upheld, but the disallowance for foreign travelling expenses was reduced to Rs. 500. The assessee was held entitled to a weighted deduction of Rs. 2,500 for travelling expenses. Consequently, the appeal was partly allowed in this regard.