1994 (7) TMI 115 - AT - Income Tax

Summary

Issues Involved:
1. Refusal of firm registration.
2. Deduction for kist payable.
3. Depreciation on assets.
4. Short deduction in respect of arrack duty.

Detailed Analysis:

1. Refusal of Firm Registration:
The Tribunal confirmed the refusal of registration of the firm. The initial assessment completed on 27th March 1984 determined the total income at Rs. 15,15,113, and registration was refused. The CIT(A) set aside the assessment, but the fresh assessment on 17th March 1987 again refused registration. The Tribunal's order dated 27th March 1989 upheld the refusal of registration.

2. Deduction for Kist Payable:
The assessee objected to the non-deduction of the kist payable amounting to Rs. 8,63,406. The CIT(A) did not grant relief for this unpaid kist amount. The Tribunal noted that the assessee followed the mercantile system of accounting, which allows expenses on an accrual basis. The Tribunal directed the Assessing Officer to deduct Rs. 8,63,406 in the computation of income, citing the Supreme Court's decision in Kedernath Jute Mfg. Co. vs. CIT (1971) 82 ITR 363 (SC), which states that it is immaterial whether the expenditure is debited in the accounts or not.

3. Depreciation on Assets:
The assessee claimed a deduction for depreciation amounting to Rs. 42,700, which was not granted by the CIT(A). The Tribunal upheld the assessee's contention, stating that there is no statutory requirement to debit the accounts with the amount of depreciation. The Tribunal directed the Assessing Officer to allow this deduction, emphasizing that depreciation is a statutory deduction under Section 32 of the IT Act, provided the prescribed particulars are furnished.

4. Short Deduction in Respect of Arrack Duty:
The assessee objected to the short deduction of arrack duty, where Rs. 3,30,045 was considered instead of Rs. 4,77,376. The Tribunal noted that the correct amount based on the earlier assessment and supported by seized books was Rs. 4,77,376. The Tribunal directed the Assessing Officer to allow the deduction of Rs. 1,47,031 (Rs. 4,77,376 - Rs. 3,30,045) in computing the income of the assessee.

Conclusion:
The Tribunal modified the order of the CIT(A) and directed the Assessing Officer to:
1. Deduct Rs. 8,63,406 for kist payable.
2. Allow depreciation of Rs. 42,700.
3. Correct the arrack duty deduction by allowing an additional Rs. 1,47,031.

The appeal was partly allowed, providing relief to the assessee on the issues of kist payable, depreciation, and arrack duty, while confirming the refusal of firm registration.