1993 (8) TMI 102 - AT - Income Tax

2009 (1) TMI 881 - AT

Issues Involved:
1. Disallowance under Rule 6D of the IT Rules.
2. Treatment of expenditure on consultation and feasibility study.
3. Write-off of bad debt.
4. Extra shift allowance.
5. Write-off of bad debt (second instance).
6. Disallowance under Section 40A(5).
7. Disallowance under Section 43B.
8. Disallowance under Section 37(3A)/(3B).
9. Disallowance of customs penalty.
10. Deduction of repayments made to customers from excise duty refund.
11. Interest under Section 216.

Issue-wise Detailed Analysis:

1. Disallowance under Rule 6D of the IT Rules:
The Department contested the CIT(A)'s decision to restrict the disallowance under Rule 6D to Rs. 43,792 instead of Rs. 49,450 as disallowed in the assessment order. The Tribunal found the matter in favor of the assessee, citing the decision in S.V. Ghatalia vs. Second ITO. This ground was allowed.

2. Treatment of Expenditure on Consultation and Feasibility Study:
The Assessing Officer treated Rs. 13,041 spent on consultation and feasibility study as capital expenditure, relying on CIT vs. Digvijai Cement Co. The CIT(A) allowed it as revenue expenditure, noting it was for improving the normal running of the business. The Tribunal agreed, distinguishing the facts from Digvijai Cement Co., and accepted the expenditure as revenue in nature. This ground was rejected.

3. Write-off of Bad Debt:
The Department challenged the CIT(A)'s direction to allow the write-off of Rs. 1,31,607 as bad debt. The Tribunal found the matter covered in favor of the assessee by its own decision for the assessment year 1985-86. This ground was rejected.

4. Extra Shift Allowance:
The CIT(A) directed the Assessing Officer to allow extra shift allowance in proportion to the actual number of days the factory worked. The Tribunal upheld the Assessing Officer's computation, rejecting the assessee's claim to reduce the stipulated 240 days to 80 days. This ground was allowed.

5. Write-off of Bad Debt (Second Instance):
The Assessing Officer allowed bad debt claims where individual amounts were Rs. 1,000 or less, totaling Rs. 10,027, but disallowed the rest. The CIT(A) allowed the entire claim without addressing the Tribunal's precedent. The Tribunal concurred with the Assessing Officer, allowing only Rs. 10,027. This ground was allowed.

6. Disallowance under Section 40A(5):
The assessee contested the inclusion of various expenses as part of 'salary' under Section 40A(5). The Tribunal partially allowed the ground concerning house rent allowance, following the Hindustan Petroleum Corpn. Ltd. decision. Other sub-grounds (b) to (f) were rejected, citing precedents against the assessee.

7. Disallowance under Section 43B:
The CIT(A) confirmed the disallowance under Section 43B. The Tribunal restored the matter to the Assessing Officer to consider the deduction under the first proviso to Section 43B, following the Jamshedpur Motor Accessories Stores decision, but no deduction for sales-tax already deducted in the next year. This ground was partly allowed.

8. Disallowance under Section 37(3A)/(3B):
The Tribunal accepted the assessee's contention to exclude 1/3rd of restaurant expenses incurred on its own employees from disallowance under Section 37(3A). Additionally, repairs to vehicles were directed to be excluded from disallowance under Section 37(3A), following CIT vs. Chase Bright Steel Ltd. This ground was partly allowed.

9. Disallowance of Customs Penalty:
The CIT(A) disallowed a customs penalty of Rs. 1,20,000, following T. Khemchand Tejoomal vs. CIT. The Tribunal found the facts similar to Khemchand Tejoomal and upheld the CIT(A)'s decision. This ground was rejected.

10. Deduction of Repayments Made to Customers from Excise Duty Refund:
The CIT(A) declined to consider the additional ground for deduction of repayments made to customers from excise duty refund, as it did not arise out of the assessment order. The Tribunal noted the quashing of the related order under Section 263, rendering the issue moot. This ground was rejected for statistical purposes.

11. Interest under Section 216:
The CIT(A) confirmed the interest under Section 216, noting the assessee's failure to elaborate its stand. The Tribunal found no further elaboration and upheld the CIT(A)'s order. The cross objection was rejected.

Conclusion:
The Department's appeal was partly allowed, and the assessee's appeal was partly allowed. The cross objection filed by the assessee was rejected.

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