1981 (3) TMI 101 - AT - Income Tax

Summary

Issues:
1. Computation of capital for deduction under section 80J of the Income Tax Act.
2. Claim of representation charges under section 80VV of the Income Tax Act.

Analysis:
1. The appellant, a company not substantially interested by the public, appealed against the CIT (Appeals)-VI, Bombay's order, which partially allowed the appeal against the ITO's order. The ITO had made a draft assessment order under section 144B of the Income Tax Act, 1961, served on the assessee on March 15, 1971. The assessee did not object to the draft order but stated its intention to appeal. The ITO completed the assessment under section 144B based on the draft order. The appellant contended that the ITO erred in rejecting the computation of capital for deduction under section 80J, citing a High Court decision and also challenged the disallowance of representation charges under section 80VV.

2. The CIT (Appeals) accepted the first contention regarding the computation of capital but rejected the second contention, citing a previous year's decision and the appellant's implied acceptance of the disallowance by not objecting to the draft order. The appellant, dissatisfied with the CIT (Appeals) order, argued that the right to appeal should allow for a review of the disallowed representation charges. The department representative supported the CIT (Appeals) decision.

3. The Appellate Tribunal found that the CIT (Appeals) should have entertained the ground regarding the disallowed representation charges and decided it on merit, as the right to appeal exists against the ITO's order. The Tribunal directed the CIT (Appeals) to reconsider this issue. However, the Tribunal upheld the CIT (Appeals) decision regarding the computation of capital for section 80J deduction, noting that a previous year's decision against the appellant had become final, and the CIT (Appeals) rightly followed it. Therefore, the appeal was partly allowed, with the representation charges issue to be reconsidered and the capital computation issue upheld.

4. In conclusion, the Tribunal directed the CIT (Appeals) to review the representation charges issue but confirmed the decision on the capital computation issue based on a previous year's final decision against the appellant.