2001 (2) TMI 270 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of compensation received as "income from other sources."
2. Disallowance of traveling expenses u/r 6D of the Income-tax Rules.
3. Deduction u/s 80M for dividend income without allocating any expenditure.

Summary:

1. Taxability of Compensation Received:
The core issue was whether the compensation of £8,50,000 (Rs. 1,27,78,112) received by the assessee from Sime Derby Holdings Limited (SDHL) should be taxed as "income from other sources." The assessee argued that the compensation was a capital receipt due to breach of fiduciary duty by common directors, not taxable as income. The Assessing Officer and CIT(A) treated it as income, citing its broad definition and lack of specific exemption. The Tribunal, however, concluded that the compensation was a capital receipt, referencing the principle that the nature of receipt is determined by its character in the hands of the receiver, not the payer. The Tribunal directed the deletion of the addition, stating that the revenue failed to prove it as a revenue receipt.

2. Disallowance of Traveling Expenses:
The assessee contested the disallowance of Rs. 50,000 out of Rs. 69,11,307 in traveling expenses on an estimated basis due to non-furnishing of particulars as required u/r 6D. The Tribunal upheld the disallowance, agreeing with the lower authorities that the assessee failed to provide necessary details.

3. Deduction u/s 80M for Dividend Income:
The revenue appealed against the CIT(A)'s decision to allow deduction u/s 80M on gross dividends without deducting any expenditure. The Assessing Officer had estimated Rs. 80,000 as expenditure related to earning the dividend. The Tribunal upheld the CIT(A)'s decision, stating that deductions should be based on actual expenditure incurred, not on estimates, aligning with the jurisdictional High Court's judgment.

Conclusion:
The Tribunal partly allowed the assessee's appeal by deleting the addition of Rs. 1,27,78,112 but upheld the disallowance of Rs. 50,000 in traveling expenses. The revenue's appeal regarding the deduction u/s 80M was dismissed.