1986 (7) TMI 162 - AT - Income Tax

Issues Involved:

1. Annulment of the assessment order.
2. Sur-tax liability deduction.
3. Status of the assessee as a public company.
4. Section 80J relief.
5. Weighted deduction under Section 35B.
6. Hotel expenses in excess of the limit under Rule 6D.
7. Entertainment and guest house expenses.
8. Sale promotion expenses.
9. Sales-tax liability of M/s Gulabchand Ratanlal.
10. Addition of electricity bill.
11. Deduction for intercom telephones and fire-extinguishers.
12. Replacement cost of carpet and jute-holding cone.
13. Expenses on wall-clocks distributed to dealers.
14. Dinner expenses for Asian games participants and employees.
15. Deduction of water-tax paid.
16. Reduction of interest under Section 40A(8).
17. Investment allowance on new machinery.
18. Investment allowance on outgoing switchboard.
19. Investment allowance on electrical machinery.
20. Depreciation on wooden cabins and double shift allowance.
21. Depreciation on Vanaspati unit and weigh bridges.
22. Extra shift allowance for Ludhiana Refinery Unit.
23. Depreciation on building at harbour.
24. Extra shift allowance for OWM Solvent unit.
25. Extra shift allowance and additional depreciation on new machinery.
26. Depreciation on electrical machinery in OWM Solvent, Ludhiana.
27. Depreciation on generator in Oswal Solvent.
28. Depreciation on plant and machinery in Ludhiana Vanaspati Unit.
29. Extra shift allowance on electrical machinery in Oswal Export Wing Unit.
30. Extra shift allowance on machinery installed during the year.
31. Depreciation on building and furniture of Export Display House.
32. ESA depreciation on generator of main textile unit.
33. Deletion of addition under the head 'leave with wages'.
34. Depreciation and investment allowance on grain analyser.
35. Deletion of unexplained investment on factory building.
36. Section 80J relief in respect of refinery units.
37. Foreign travelling expenses.
38. Deletion of addition in Madras Solvent Unit.
39. Deletion of addition for under-valuation of closing stock.
40. Ad hoc addition in Ludhiana Refinery Unit.
41. Deletion of addition in Madras Refinery Unit.
42. Ad hoc addition in Oswal Solvent Unit and OWM Solvent Unit.
43. Deletion of addition in Ludhiana Vanaspati Unit.
44. Unpaid electricity bill and reduction.
45. Investment allowance on exhaust fan and humidifier.
46. Investment allowance on new machinery in Ludhiana Refinery Unit and Madras Oil Refinery Unit.
47. Depreciation on gas cylinders.
48. Extra shift allowance on storage and cooling tower.
49. Depreciation on godowns and toilets in factory premises.
50. Triple shift allowance on Vanaspati Plant.
51. Additional depreciation under Section 32(1)(iia).
52. Depreciation on building of Export Display House.

Detailed Analysis:

1. Annulment of the Assessment Order:
The assessee's request for annulment of the assessment order was not pressed during the hearing and was subsequently rejected.

2. Sur-tax Liability Deduction:
The assessee's ground for deduction of sur-tax liability was rejected, consistent with the bench's previous decisions, including the assessee's own case for the assessment year 1976-77.

3. Status of the Assessee as a Public Company:
The ground regarding the assessee's status as a public company was not pressed by the counsel and was thus rejected.

4. Section 80J Relief:
The ground for Section 80J relief was considered academic due to a Supreme Court decision, and thus, it was rejected.

5. Weighted Deduction under Section 35B:
The assessee's claim for weighted deduction on travelling expenses was partially allowed. The Tribunal agreed that actual export is not necessary for claiming weighted deduction on foreign travelling. However, since the trip was for both exploring foreign markets and purchasing machinery, the weighted deduction was allowed on 50% of the expenses.

6. Hotel Expenses in Excess of Limit under Rule 6D:
The Tribunal upheld the CIT(A)'s decision to disallow the excess hotel expenses as per Rule 6D, consistent with previous orders in the assessee's case.

7. Entertainment and Guest House Expenses:
The disallowance of Rs. 12,000 for entertainment and guest house expenses was upheld, as the issue was already covered against the assessee.

8. Sale Promotion Expenses:
The Tribunal confirmed the CIT(A)'s decision to disallow Rs. 91,273 for sale promotion expenses due to the lack of evidence regarding the ultimate beneficiaries of the distributed items.

9. Sales-Tax Liability of M/s Gulabchand Ratanlal:
The CIT(A)'s decision was reversed, allowing the deduction of Rs. 33,996 for sales-tax liability, as the assessee suffered the loss during the year under consideration due to business relations.

10. Addition of Electricity Bill:
The Tribunal allowed the total claim of Rs. 1,03,796 for the electricity bill, confirming that the liability arose during the year under consideration and should be allowed as a deduction.

11. Deduction for Intercom Telephones and Fire-Extinguishers:
The Tribunal reversed the CIT(A)'s decision and allowed the deduction for intercom telephones and fire-extinguishers as revenue expenditure.

12. Replacement Cost of Carpet and Jute-Holding Cone:
The Tribunal allowed the claim for the replacement cost of carpet, jute-holding cone, and fire-extinguishers as revenue expenditure.

13. Expenses on Wall-Clocks Distributed to Dealers:
The Tribunal allowed a relief of Rs. 12,000 for wall-clocks distributed to dealers, accepting the alternative contention of the assessee.

14. Dinner Expenses for Asian Games Participants and Employees:
The disallowance of Rs. 10,105 for dinner expenses was upheld, as the Tribunal found no force in the assessee's contention.

15. Deduction of Water-Tax Paid:
The Tribunal allowed the deduction of Rs. 3,000 for water-tax paid, as the demand was raised during the year under consideration.

16. Reduction of Interest under Section 40A(8):
The Tribunal upheld the CIT(A)'s decision to dismiss the claim for reducing Rs. 25,570 under Section 40A(8).

17. Investment Allowance on New Machinery:
The Tribunal upheld the CIT(A)'s decision to allow investment allowance on humidifiers and exhaust fans but rejected the claim for weighing scales and laboratory equipment.

18. Investment Allowance on Outgoing Switchboard:
The Tribunal allowed the investment allowance on the outgoing switchboard, considering it part and parcel of the Vanaspati unit.

19. Investment Allowance on Electrical Machinery:
The Tribunal allowed the investment allowance on electrical machinery in the solvent plant, considering it part and parcel of the plant.

20. Depreciation on Wooden Cabins and Double Shift Allowance:
The Tribunal allowed 100% depreciation on wooden cabins and double shift allowance on electrical installations in the fully-fashioned unit.

21. Depreciation on Vanaspati Unit and Weigh Bridges:
The Tribunal dismissed the claim for depreciation at 15% on the Vanaspati unit and extra shift allowance on weigh bridges, consistent with previous decisions.

22. Extra Shift Allowance for Ludhiana Refinery Unit:
The Tribunal dismissed the claim for extra shift allowance for 258 days in the Ludhiana Refinery Unit as it was not pressed by the assessee.

23. Depreciation on Building at Harbour:
The Tribunal directed the ITO to allow 10% depreciation on the building at the harbour used for storage tanks.

24. Extra Shift Allowance for OWM Solvent Unit:
The Tribunal dismissed the claim for extra shift allowance for the full year in the OWM Solvent unit due to lack of evidence.

25. Extra Shift Allowance and Additional Depreciation on New Machinery:
The Tribunal directed the ITO to allow extra shift allowance and additional depreciation on new machinery installed in the OWM Solvent unit.

26. Depreciation on Electrical Machinery in OWM Solvent, Ludhiana:
The Tribunal allowed extra shift allowance on electrical machinery installed in the OWM Solvent, Ludhiana.

27. Depreciation on Generator in Oswal Solvent:
The Tribunal allowed depreciation at 20% on the generator installed in the Oswal Solvent unit.

28. Depreciation on Plant and Machinery in Ludhiana Vanaspati Unit:
The Tribunal dismissed the claim for depreciation at 15% on plant and machinery in the Ludhiana Vanaspati unit but allowed extra shift allowance on electrical machinery.

29. Extra Shift Allowance on Electrical Machinery in Oswal Export Wing Unit:
The Tribunal allowed extra shift allowance on electrical machinery installed in the Oswal Export Wing Unit.

30. Extra Shift Allowance on Machinery Installed During the Year:
The Tribunal directed the ITO to allow extra shift allowance on machinery installed during the year under consideration.

31. Depreciation on Building and Furniture of Export Display House:
The Tribunal dismissed the claim for depreciation on the building and furniture of the Export Display House due to lack of evidence.

32. ESA Depreciation on Generator of Main Textile Unit:
The Tribunal allowed ESA depreciation on the generator of the main textile unit, consistent with previous decisions.

33. Deletion of Addition under the Head 'Leave with Wages':
The Tribunal upheld the deletion of Rs. 2,36,934 made by the ITO under the head 'leave with wages', consistent with previous decisions.

34. Depreciation and Investment Allowance on Grain Analyser:
The Tribunal upheld the CIT(A)'s decision to allow depreciation and investment allowance on the grain analyser, considering it part of the solvent plant.

35. Deletion of Unexplained Investment on Factory Building:
The Tribunal upheld the deletion of Rs. 8,26,000 for unexplained investment on the factory building, finding no evidence of unaccounted investment.

36. Section 80J Relief in Respect of Refinery Units:
The Tribunal upheld the CIT(A)'s decision to grant Section 80J relief in respect of the refinery units, consistent with previous decisions.

37. Foreign Travelling Expenses:
The Tribunal upheld the CIT(A)'s decision to allow Rs. 77,713 for foreign travelling expenses under Section 37 but allowed weighted deduction on 50% of the said amount.

38. Deletion of Addition in Madras Solvent Unit:
The Tribunal upheld the deletion of Rs. 20,328 from the Madras Solvent Unit, accepting the assessee's explanation for the loss.

39. Deletion of Addition for Under-Valuation of Closing Stock:
The Tribunal upheld the deletion of Rs. 3,14,462 for under-valuation of closing stock, accepting the assessee's method of valuing closing stock on a direct cost basis.

40. Ad Hoc Addition in Ludhiana Refinery Unit:
The Tribunal upheld the deletion of Rs. 20 lakhs in the Ludhiana Refinery Unit, finding no discrepancy in the books of account.

41. Deletion of Addition in Madras Refinery Unit:
The Tribunal upheld the deletion of Rs. 5,20,000 in the Madras Refinery Unit, finding no material change in facts compared to the earlier year.

42. Ad Hoc Addition in Oswal Solvent Unit and OWM Solvent Unit:
The Tribunal upheld the deletion of Rs. 50 lakhs in the Oswal Solvent Unit and OWM Solvent Unit, finding no discrepancy in the books of account.

43. Deletion of Addition in Ludhiana Vanaspati Unit:
The Tribunal upheld the deletion of Rs. 5 lakhs in the Ludhiana Vanaspati Unit, finding that the assessee had discharged its burden of proving purchases.

44. Unpaid Electricity Bill and Reduction:
The Tribunal allowed the total claim of Rs. 1,03,796 for the electricity bill, consistent with the decision in the assessee's appeal.

45. Investment Allowance on Exhaust Fan and Humidifier:
The Tribunal upheld the CIT(A)'s decision to allow investment allowance on exhaust fans and humidifiers, consistent with the decision in the assessee's appeal.

46. Investment Allowance on New Machinery in Ludhiana Refinery Unit and Madras Oil Refinery Unit:
The Tribunal upheld the CIT(A)'s decision to allow investment allowance on new machinery in the Ludhiana Refinery Unit and Madras Oil Refinery Unit, consistent with previous decisions.

47. Depreciation on Gas Cylinders:
The Tribunal upheld the CIT(A)'s decision to allow 100% depreciation on gas cylinders, finding no reason to interfere.

48. Extra Shift Allowance on Storage and Cooling Tower:
The Tribunal reversed the CIT(A)'s decision to allow extra shift allowance on storage and cooling tower, as no claim was made before the ITO.

49. Depreciation on Godowns and Toilets in Factory Premises:
The Tribunal modified the CIT(A)'s decision, directing the ITO to allow 10% depreciation on toilets and 5% on godowns.

50. Triple Shift Allowance on Vanaspati Plant:
The Tribunal upheld the CIT(A)'s decision to allow triple shift allowance on the Vanaspati Plant, considering it had worked triple shift for more than 240 days.

51. Additional Depreciation under Section 32(1)(iia):
The Tribunal upheld the CIT(A)'s decision to allow additional depreciation, as the machinery was new and installed after 31st March 1980.

52. Depreciation on Building of Export Display House:
The Tribunal modified the CIT(A)'s decision, reducing the depreciation to 2.5% and confirming that the building was used in the business interest of the company.

Conclusion:
Both the appeals of the assessee and the Revenue are partly allowed, with detailed issue-wise decisions provided above.

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