1979 (8) TMI 98 - AT - Income Tax

Summary

Issues:
1. Allowance of various claims by the assessee including bad debts, ex-gratia payment, entertainment expenses, and telephone charges.
2. Estimation of profit at the rate of 12.5% on gross receipts from the contract.
3. Permission for filing an additional ground of appeal regarding pre-operational expenses.
4. Disallowance of claims by the Income Tax Officer (ITO) and upheld by the Commissioner.
5. Disposal of the appeal by the Commissioner without proper consideration of submissions made by the assessee.
6. Department's objection to the deletion of disallowance of Rs. 31,882 for construction of quarters for employees.

Analysis:
The appeal involved the assessee contesting the Commissioner's order on various grounds, including bad debts, ex-gratia payment, entertainment expenses, and telephone charges. The ITO had made disallowances on these claims, citing reasons such as debts not fully bad, ex gratia payment not allowable, and non-verifiable telephone charges. The profit from contract work was estimated at 12.5%, and deduction for pre-operational expenses was denied due to missing certification. The Commissioner upheld the ITO's decision, stating the lack of convincing arguments from the assessee's counsel. The Tribunal admitted an additional ground of appeal regarding pre-operational expenses, as it was inadvertently missed during the initial filing.

The Tribunal found that the Commissioner had not properly considered the submissions made by the assessee's counsel regarding the disallowances. Consequently, the case was remanded back to the Commissioner for reconsideration after allowing the assessee an opportunity to be heard. The Department objected to the deletion of Rs. 31,882 claimed by the assessee for the construction of quarters for employees. The ITO disallowed the claim, considering it a capital expenditure for future benefits like mining lease grants. However, the Commissioner ruled in favor of the assessee, noting that the quarters did not become the property of the assessee, leading to the deletion of the disallowance.

The Departmental representative argued that the construction of quarters constituted a capital asset with enduring benefits, while the assessee contended that the quarters were temporary structures not owned by them. The Tribunal upheld the Commissioner's decision, stating that the quarters were temporary huts and did not belong to the assessee, leading to the dismissal of the Department's cross objection. Consequently, the assessee's appeal was treated as allowed for statistical purposes.