2002 (3) TMI 212 - AT - Income Tax

Summary

Issues:
1. Disallowance of office expenses on account of infraction of law.
2. Disallowance of guest-house expenses under section 37(4).
3. Disallowance of conveyance expenses and car expenses.
4. Treatment of poultry sheds as building instead of plant and machinery.

Analysis:

Issue 1: Disallowance of office expenses on account of infraction of law
The appeal by the assessee against the disallowance of Rs. 3,000 included in office expenses on account of infraction of law was rejected as not pressed by the learned counsel.

Issue 2: Disallowance of guest-house expenses under section 37(4)
The Tribunal confirmed the disallowance of Rs. 7,484 towards guest-house expenses under section 37(4) based on previous decisions and upheld by the AO and learned CIT(A).

Issue 3: Disallowance of conveyance expenses and car expenses
The Tribunal deleted the disallowance of 10% of conveyance expenses and car expenses amounting to Rs. 31,032 and Rs. 20,000, respectively, as these expenses could not be regarded as personal expenses in the hands of a private limited company based on various legal precedents.

Issue 4: Treatment of poultry sheds as building instead of plant and machinery
The assessee contended that poultry sheds should be treated as plant under section 43(3) as they are essential apparatus/tools for carrying on the poultry-farming business. The Tribunal agreed with the assessee, emphasizing that poultry sheds are specifically designed to function as necessary apparatus for poultry-farming. The Tribunal relied on previous decisions and the functional test to determine that poultry sheds qualify as plant, following the apex Court's distinction in the case of Karnataka Power Corporation. As there was no change in the nature of the sheds, the Tribunal treated the poultry shed as plant and allowed depreciation at 33.33%.

In conclusion, the appeal was partly allowed based on the above analysis and decisions on the various issues raised in the judgment.