2000 (5) TMI 169 - AT - Income Tax

Issues Involved:
1. Disallowance of Rs. 2,26,000 paid to M/s N.B.E. Food Systems (P) Ltd.
2. Disallowance under s. 40A(3) of Rs. 1,28,601.
3. Alleged profit on sale of machines.
4. Disallowance of Rs. 69,000 claimed as deduction for consultation payment to Shri B.M. Lal.
5. Non-adjudication of ground Nos. 4, 5, 8, and 10 of the memo of appeal.
6. Disallowance of Rs. 38,000 out of Rs. 76,000 claimed by the assessee.
7. Adoption of a lower rate of depreciation on factory building.
8. Sustenance of interest charged under s. 216.
9. Disallowance of 50% of final setting and commission charges.
10. Labour charges paid to M/s NBEFS.
11. Trading addition of Rs. 54,043.
12. Depreciation of building.
13. Sustenance of interest charged under s. 216 on income after partial reliefs.

Detailed Analysis:

1. Disallowance of Rs. 2,26,000 paid to M/s N.B.E. Food Systems (P) Ltd.:
The AO disallowed the payment of Rs. 2,26,000 to M/s NBEFS, where the assessee's husband was the managing director, under s. 143(3). The assessee contended that the payment was for designing and assembling a plant for M/s Chand Fabricators (P) Ltd. (CFPL). The CIT(A) upheld the disallowance, stating the payment was unwarranted. However, the Tribunal accepted the qualifications of Shri B.M. Lal and allowed the assessee's claim, following the precedent from the asst. yr. 1985-86.

2. Disallowance under s. 40A(3) of Rs. 1,28,601:
The AO disallowed Rs. 1,28,601 for cash payments exceeding Rs. 2,500 to transporters and other parties. The Tribunal allowed the payment of Rs. 43,600 to M/s Bombay Poona Roadways, acknowledging the prevalent practice of cash payments to transporters. However, other payments were disallowed due to lack of confirmation from the parties, following the precedent set by the Punjab & Haryana High Court.

3. Alleged profit on sale of machines:
The AO estimated a profit of Rs. 20,000 on machinery sales, which the assessee contested as being based on an estimate without proper inquiry. The Tribunal set aside the issue for fresh investigation by the AO, directing a reasonable opportunity for the assessee to present her case.

4. Disallowance of Rs. 69,000 claimed as deduction for consultation payment to Shri B.M. Lal:
The CIT(A) did not address this issue separately, assuming it was part of the Rs. 2,26,000 disallowance. The Tribunal found this assumption incorrect and remanded the issue back to the CIT(A) for fresh adjudication.

5. Non-adjudication of ground Nos. 4, 5, 8, and 10 of the memo of appeal:
The Tribunal restored these grounds to the CIT(A) for fresh adjudication, ensuring the assessee is given an opportunity to be heard.

6. Disallowance of Rs. 38,000 out of Rs. 76,000 claimed by the assessee:
The Tribunal upheld the CIT(A)'s disallowance of Rs. 38,000, following the precedent from ITA No. 7007/D/1991.

7. Adoption of a lower rate of depreciation on factory building:
The CIT(A) had set aside this issue to the AO for verification. The Tribunal dismissed the assessee's ground as defective since the CIT(A) had not made a final decision but directed verification.

8. Sustenance of interest charged under s. 216:
The CIT(A) directed the AO to recompute interest under s. 216 on reduced income. The Tribunal dismissed the assessee's ground, finding it did not arise from the CIT(A)'s order.

9. Disallowance of 50% of final setting and commission charges:
The Tribunal dismissed the assessee's ground, following its earlier decision in ITA No. 1681/D/1992, which confirmed the CIT(A)'s action.

10. Labour charges paid to M/s NBEFS:
The Tribunal allowed the deduction for labour charges paid to M/s NBEFS, consistent with its decision in the appeal for asst. yr. 1986-87.

11. Trading addition of Rs. 54,043:
The CIT(A) set aside this issue to the AO for reconsideration. The Tribunal upheld this decision, allowing the assessee to make submissions in the second round.

12. Depreciation of building:
The CIT(A) had set aside this issue to the AO for appropriate investigation. The Tribunal upheld this approach, as the CIT(A) had not disallowed the claim but sought further verification.

13. Sustenance of interest charged under s. 216 on income after partial reliefs:
The CIT(A) directed the AO to charge interest on the reduced income. The Tribunal dismissed the assessee's ground, finding it defective.

Conclusion:
The Tribunal's decisions provided partial relief to the assessee on specific issues while upholding the disallowances and remanding certain matters for further investigation or fresh adjudication. The appeals were partly allowed or dismissed based on the merits of each issue.

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