1982 (4) TMI 120 - AT - Income Tax

Summary

Issues: Disallowance of deferred revenue expenditure, Disallowance of certain expenses, Sustension of entertainment expenses

Disallowed Deferred Revenue Expenditure:
The appeal contested the disallowance of Rs. 82,062 claimed as deferred revenue expenditure for the assessment year 1975-76. The dispute stemmed from an agreement between the assessee and the State Trading Corporation for the import of agricultural tractors. The assessee paid 15% upfront and the rest in 16 equal instalments with interest. The Income Tax Officer (ITO) had allowed similar expenses in previous years. The assessee argued that the payments were revenue in nature and inconsistently treated by the revenue department. The Revenue contended that the ITO could change opinions, but acknowledged no material change in facts. The Tribunal referred to the judgment in Dalmia Dadri Cement Ltd. case and concluded that the earlier decisions were not arbitrary or perverse. The Tribunal found the authorities erred in disallowing the claimed amount and allowed the appeal.

Disallowance of Certain Expenses:
Another issue concerned the disallowance of Rs. 15,000 out of Rs. 50,000 added to the total income. The IAC found certain expenses debited to the current year without details. The CIT (Appeals) sustained Rs. 15,000 disallowance. The assessee argued that the liability was created when known and allowable under the mercantile system. The Tribunal found no specific amount related to earlier years and accepted the liability as provided in the books, citing the E. D. Sassoon & Company Ltd. case. Thus, the Tribunal allowed the Rs. 15,000.

Sustension of Entertainment Expenses:
The last issue involved the sustension of Rs. 6,844 out of entertainment expenses. The assessee lacked details of these expenses. The Tribunal, following the Punjab & Haryana High Court judgment, upheld the disallowance of entertainment expenses under section 37(2B) of the Act. The Tribunal allowed the appeal in part, addressing the various grounds raised by the assessee and providing detailed reasoning for each decision.