1990 (11) TMI 190 - AT - Income Tax

Applied To, Banking Company, Carry Forward And Set Off, Head Office Expenditure, Interest On Securities, Power To Admit Additional Ground, Previous Year

Issues Involved:
1. Rejection of deduction claim under section 20 of the Act.
2. Applicability of section 44C for head office expenses.
3. Disallowance of representative office expenses.
4. Admission of additional ground regarding expenses from previous years.

Issue-wise Detailed Analysis:

1. Rejection of Deduction Claim under Section 20 of the Act:

The appellant, a non-resident banking company, contested the CIT (Appeals)'s decision rejecting its claim for deduction of proportionate expenses under section 20 of the Act. The appellant argued that the ITO should have apportioned the gross expenditure between income from "interest on securities" and "profits and gains from business," and then made disallowances under section 40A(5) only for the business income portion. The Tribunal noted that section 40A(5) applies independently and only to business income, distinguishing it from the Madras High Court's decision in the Indian Overseas Bank case. The Tribunal reversed the CIT (Appeals)'s order, allowing the appellant's claim.

2. Applicability of Section 44C for Head Office Expenses:

The appellant argued that section 44C was inapplicable as it was not possible to work out an average of head office expenses for the base period of 1974-75 to 1976-77 since this was the first year of its business in India. The CIT(A) rejected this argument, stating that the section's intent was to prevent evasion and that if one clause is inapplicable, it does not render the remaining clauses nugatory. The Tribunal upheld the CIT(A)'s decision, stating that the section's purpose was to regulate deductions for non-resident assessees and that the unavailability of one computation method does not nullify the section. The Tribunal found the appellant's interpretation far-fetched and confirmed the ITO's application of section 44C.

3. Disallowance of Representative Office Expenses:

The appellant's claim for representative office expenses was disallowed by the CIT(A) based on a previous year's appellate order. The Tribunal confirmed this disallowance, referencing its earlier decision in the appellant's case for the assessment year 1981-82, where similar expenses were disallowed. The Tribunal upheld the CIT(A)'s decision, dismissing the appellant's third ground of appeal.

4. Admission of Additional Ground Regarding Expenses from Previous Years:

The appellant sought to admit an additional ground to allow expenses from assessment years 1980-81 to 1983-84 as expenses for the current year. The Tribunal declined to admit this additional ground, noting that it was not raised before the assessing officer or appellate authority and had been previously decided against the appellant. The Tribunal emphasized the need for finality in proceedings and stated that the issue was not a pure question of law but involved factual determinations not made by the revenue authorities. Consequently, the additional ground was dismissed in limine.

Conclusion:

The appeal was partly allowed, with the Tribunal reversing the CIT(A)'s decision on the first ground regarding section 20 deductions but upholding the CIT(A)'s decisions on the applicability of section 44C, disallowance of representative office expenses, and rejecting the additional ground.

← Previous Next →