1992 (1) TMI 156 - AT - Income Tax

Issues Involved:
1. Disallowance of Expenditure on Diesel Generator
2. Disallowance u/s 43B for Excise Duty and Other Statutory Liabilities
3. Disallowance of Payment to Consultants
4. Disallowance of Liaison Work Expenditure
5. Disallowance of Entertainment and Gift Expenses
6. Disallowance of Car and Chowkidar Expenses
7. Interest on Fixed Deposits as Income
8. Capital Gains on Sale of Plots
9. Miscellaneous Disallowances
10. Reassessment of Issues for the Next Assessment Year

Summary:

1. Disallowance of Expenditure on Diesel Generator:
The first issue pertains to the disallowance of Rs. 34,03,163 incurred on the purchase of a 1146 KVA diesel generator. The assessee claimed this as a revenue expenditure arguing it was a replacement for an old generator due to acute power crisis. The Tribunal upheld the authorities' decision, stating the expenditure was capital in nature, not a mere replacement, and cited CIT vs. Sri Rama Sugar Mills and other relevant cases to support this conclusion.

2. Disallowance u/s 43B for Excise Duty and Other Statutory Liabilities:
The second issue involves the disallowance of Rs. 54,81,990 u/s 43B for excise duty. The Tribunal concluded that the payment made to the bank for obtaining a bank guarantee, which was accepted by the excise authorities, amounted to "actual payment" under s. 43B. This decision was supported by the interpretation of "actually paid" in Sailendra Narayan vs. Asstt. Collector of Agrl. IT and other relevant cases. For other statutory liabilities, the Tribunal directed the Assessing Officer to verify payments against the statutory deadlines.

3. Disallowance of Payment to Consultants:
The third issue concerns the disallowance of Rs. 10,33,553 paid to M/s Dalal Consultants. The Tribunal upheld the disallowance due to lack of evidence of services rendered during the relevant accounting period. It directed that the deduction be allowed in the year services are rendered.

4. Disallowance of Liaison Work Expenditure:
The fourth issue is the disallowance of Rs. 58,894 paid to M/s G.L. Chawla & Associates for liaison work. The Tribunal deleted the disallowance, stating there was no evidence of extra commercial considerations and the payee was not fictitious.

5. Disallowance of Entertainment and Gift Expenses:
The fifth issue involves Rs. 41,500 spent on entertainment and gifts. The Tribunal held that the expenditure on gifts did not fall under Rule 6B as they were not for advertisement purposes and directed the Assessing Officer to recompute the allowance/disallowance of entertainment expenditure.

6. Disallowance of Car and Chowkidar Expenses:
The sixth issue pertains to Rs. 25,000 disallowed for car expenses and Rs. 10,826 for Chowkidars' salaries. The Tribunal directed the Assessing Officer to compute the value of perquisites as per Rule 3 of the IT Rules and allowed the claim based on CBDT circular rates for Chowkidars.

7. Interest on Fixed Deposits as Income:
The seventh issue is the inclusion of Rs. 32,84,506 as interest income on fixed deposits. The Tribunal upheld the inclusion, consistent with its earlier decisions.

8. Capital Gains on Sale of Plots:
The eighth issue involves the computation of capital gains on plots sold to employees. The Tribunal upheld the CIT(A)'s decision that the transfer was not for tax avoidance, thus rejecting the Assessing Officer's valuation based on market price.

9. Miscellaneous Disallowances:
The ninth issue includes various disallowances such as Rs. 50,000 out of miscellaneous expenses, Rs. 6,000 for providing tea and snacks, and Rs. 1,29,390 for entertainment. The Tribunal upheld the CIT(A)'s decisions on these disallowances.

10. Reassessment of Issues for the Next Assessment Year:
For the next assessment year, similar issues were reassessed, including the disallowance of Rs. 13,18,406 u/s 35 for scientific research, Rs. 54,50,501 u/s 43B for excise duty, and other statutory liabilities. The Tribunal directed the Assessing Officer to seek a decision from the prescribed authority u/s 35(3) and allowed the claim for excise duty based on the same rationale as the previous year.

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