1984 (11) TMI 124 - AT - Income Tax

Issues Involved:
1. Nature of Payment to M.M.M.D.C.S.
2. Inclusion of Excess Sales Tax Provision as Income
3. Expenses on Guest House
4. Retainer Fee and Car Maintenance Expenses for Dr. Kothari
5. Usage of Sterling Apartment
6. Holiday Home Expenditure
7. Weighted Deduction u/s 35B
8. Seminar Expenses
9. Rebates Provision
10. Boarding Expenses
11. Tea, Coffee, and Snacks Expenses
12. Petty Expenses Disallowance
13. Business Promotion Expenses
14. Repairs of Nala and Kuccha Road
15. Legal Expenses for Share Dispute
16. Penalty on Imported Goods
17. Rent-Free Quarters for Government Employees
18. Depreciation on Cops
19. Deduction u/s 80J for Unit-B
20. Higher Rate of Development Rebate
21. Development Rebate Verification
22. Fluctuation in Foreign Currency Exchange Rate
23. Depreciation Allowance
24. Appreciation in Foreign Currency Balance
25. Textile Committee Fee
26. Commission to Sole Selling Agents

Summary:

1. Nature of Payment to M.M.M.D.C.S.:
The Tribunal upheld the CIT(Appeals) decision that the sum of Rs. 2,00,000 paid by the assessee to M.M.M.D.C.S. was not allowable as revenue expenditure. It was considered a donation and not welfare expenses for employees, as there was no evidence of preferential admission for employees' children.

2. Inclusion of Excess Sales Tax Provision as Income:
The Tribunal upheld the inclusion of Rs. 30,444 as income for the year under consideration, as the amount was collected as sales tax but not paid to the State treasury.

3. Expenses on Guest House:
The Tribunal agreed with the CIT(Appeals) that expenses on the Panchsheel Park bungalow from 2nd March to 15th June 1973 were disallowed as they were related to the guest house and not for business purposes.

4. Retainer Fee and Car Maintenance Expenses for Dr. Kothari:
The Tribunal allowed the deduction of Rs. 7,200 as retainer fee and Rs. 25,000 for car maintenance expenses, as Dr. Kothari rendered medical services to the employees of the assessee company.

5. Usage of Sterling Apartment:
The Tribunal upheld the CIT(Appeals) decision that the rental income from Sterling Apartment was business income and not disallowable under s. 37(3) or (4) of the Act.

6. Holiday Home Expenditure:
The Tribunal allowed the expenditure of Rs. 14,220 on the holiday home for employees as allowable revenue expenditure.

7. Weighted Deduction u/s 35B:
The Tribunal upheld the CIT(Appeals) decision allowing weighted deduction u/s 35B for Rs. 5,000 paid to Export Market/Management Services Pvt. Ltd.

8. Seminar Expenses:
The Tribunal allowed Rs. 8,293 as revenue expenditure for the seminar conducted exclusively for the employees of the assessee company.

9. Rebates Provision:
The Tribunal upheld the disallowance of Rs. 2,19,644 as it represented a mere provision and not an actual liability.

10. Boarding Expenses:
The Tribunal upheld the CIT(Appeals) decision disallowing Rs. 98,820 out of Rs. 1,27,127 as entertainment expenses, following the decision in Brijraman Dass & Sons.

11. Tea, Coffee, and Snacks Expenses:
The Tribunal upheld the CIT(Appeals) decision restricting the disallowance to Rs. 9,386, the balance being the expenditure pertaining to the staff members.

12. Petty Expenses Disallowance:
The Tribunal upheld the disallowance of Rs. 5,000 out of Rs. 11,658 due to lack of verifiable details.

13. Business Promotion Expenses:
The Tribunal upheld the disallowance of Rs. 37,170 as entertainment expenses, following the decision in Brijraman Dass & Sons.

14. Repairs of Nala and Kuccha Road:
The Tribunal allowed the expenditure of Rs. 57,013 as revenue expenditure for repairs and maintenance.

15. Legal Expenses for Share Dispute:
The Tribunal allowed Rs. 4,400 as revenue expenditure for legal expenses incurred in a share dispute, as it was for the business interest of the assessee.

16. Penalty on Imported Goods:
The Tribunal set aside the disallowance of Rs. 76,000 and directed the ITO to reassess based on the actual penalty amount of Rs. 10,000 and the extent of stock consumed.

17. Rent-Free Quarters for Government Employees:
The Tribunal held that the income from quarters let out to government employees was business income and no notional income should be added.

18. Depreciation on Cops:
The Tribunal upheld the allowance of development rebate on cops, considering them an integral part of the plant and machinery.

19. Deduction u/s 80J for Unit-B:
The Tribunal upheld the CIT(Appeals) decision allowing deduction u/s 80J for Unit-B, following the earlier order for asst. yr. 1973-74.

20. Higher Rate of Development Rebate:
The Tribunal upheld the CIT(Appeals) decision allowing development rebate at a higher rate for Nylon-6 yarn, considering it a petrochemical.

21. Development Rebate Verification:
The Tribunal upheld the CIT(Appeals) direction to verify and allow development rebate in accordance with law.

22. Fluctuation in Foreign Currency Exchange Rate:
The Tribunal reversed the CIT(Appeals) decision and restored the ITO's order, disallowing the addition of Rs. 34,63,607 to the cost of machinery.

23. Depreciation Allowance:
The Tribunal upheld the CIT(Appeals) direction to allow depreciation in accordance with earlier orders and law.

24. Appreciation in Foreign Currency Balance:
The Tribunal upheld the CIT(Appeals) decision that the appreciation of Rs. 30,493 in foreign currency balance was capital in nature.

25. Textile Committee Fee:
The Tribunal upheld the allowance of Rs. 58,483 as revenue expenditure for the fee payable to the Textile Committee.

26. Commission to Sole Selling Agents:
The Tribunal upheld the CIT(Appeals) decision allowing Rs. 26,40,122 paid as commission to SSC, considering it a genuine expenditure.

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