1995 (6) TMI 58 - AT - Income Tax

Assessing Officer Assessment Year Business Expenditure Expenditure Incurred Export Business Foreign Exchange Sale Proceeds Such Employee Total Income

Summary

Issues:
1. Disallowance under section 40A(5) for building maintenance, depreciation, and repairs.
2. Disallowance under section 40A(5) for motor cars maintenance and depreciation.
3. Disallowance of ex gratia payments to covenanted staff.
4. Disallowance of traveling expenditure for the wife of a senior executive.
5. Denial of deduction under section 80HHC.
6. Failure to give credit for tax deducted at source.

Analysis:
1. The appellant company faced disallowance under section 40A(5) for building maintenance, depreciation, and repairs. The disallowance was upheld based on previous court decisions. The disallowance for motor cars maintenance and depreciation was also addressed, with the disallowance being reduced to 15% from the initial 33 1/3% based on past tribunal decisions.

2. The issue of disallowance of ex gratia payments to covenanted staff was raised. The appellant argued that these payments should be allowed under section 37(1) of the Income-tax Act, as they were not bonus payments but rather payments in the course of business. The tribunal agreed, considering the unique circumstances of the payments and the absence of a permanent commitment towards the staff.

3. The disallowance of traveling expenditure for the senior executive's wife was contested, citing a High Court decision. However, the tribunal upheld the disallowance, emphasizing that the wife had no official capacity with the company.

4. The denial of deduction under section 80HHC was challenged by the appellant. The tribunal analyzed the provisions of section 80AB and 80HHC, concluding that the appellant was entitled to the deduction under section 80HHC. The matter was remanded to the Assessing Officer for proper quantification and allowance of the deduction.

5. The final issue pertained to the failure to give credit for tax deducted at source. The tribunal directed the Assessing Officer to adjust the tax deductions claimed by the appellant against the determined tax liability.

In conclusion, the tribunal partly allowed the appeal, addressing each issue raised by the appellant and providing detailed reasoning for its decisions.