1983 (3) TMI 112 - AT - Income Tax

Issues Involved:
1. Allowance of depreciation for Ballabgarh unit.
2. Allowance of depreciation for Batala unit.
3. Deduction under Section 80J.
4. Additional claim of deduction for cost of land used for agricultural purposes under Section 80J.
5. Development rebate for the assessment year 1973-74.
6. Disallowance of sales promotion expenses for assessment years 1975-76 and 1976-77.
7. Disallowance of reimbursement of medical expenses for assessment years 1975-76 and 1976-77.
8. Disallowance of car expenses under Section 40(5) for the assessment year 1976-77.
9. Disallowance of various small expenses.

Detailed Analysis:

1. Allowance of Depreciation for Ballabgarh Unit:
The assessee, a public limited company, contested the allowance of depreciation for assets of the Ballabgarh unit. The Income Tax Officer (ITO) determined the allowable depreciation in accordance with the IT Act and allowed it. The Commissioner of Income Tax (Appeals) [CIT (A)] confirmed the ITO's orders. The Tribunal upheld the CIT (A)'s orders, referencing an earlier decision in the assessee's own case for the assessment years 1968-69 to 1971-72.

2. Allowance of Depreciation for Batala Unit:
The assessee argued that depreciation was not correctly allowed for the Batala unit. However, the detailed working of the depreciation allowance was not provided, leading the Tribunal to uphold the CIT (A)'s decision. The ITO was directed to work out allowable depreciation based on the written down value (w.d.v.) as per records.

3. Deduction under Section 80J:
The assessee claimed that the amendment to Section 80J, effective from 1st April 1972, was not applicable. They argued that Rule 19A was held ultra vires in the case of Century Enka Ltd. vs. ITO & Ors. The Tribunal noted that the ruling was superseded by the Finance (2) Act, 1980, with retrospective effect. The CIT (A)'s directions were found to be in accordance with the law, and the orders were confirmed.

4. Additional Claim of Deduction for Cost of Land Used for Agricultural Purposes under Section 80J:
For the assessment year 1974-75, the assessee claimed a deduction for the cost of land used for agricultural purposes. The lower authorities found that agricultural income was not included in the business profits. The Tribunal upheld the denial of the claim, stating that the income from the land was not included in the business profit, thus the benefit could not be extended.

5. Development Rebate for the Assessment Year 1973-74:
The assessee claimed a development rebate which was disallowed by the ITO due to the non-creation of the required reserve. The CIT (A) confirmed the disallowance. The Tribunal acknowledged conflicting decisions on this issue but ultimately directed the ITO to adopt a method allowing the assessee to claim the development rebate in the next year's assessment, provided the reserve was created.

6. Disallowance of Sales Promotion Expenses for Assessment Years 1975-76 and 1976-77:
The expenses claimed under sales promotion were treated as entertainment expenses by the lower authorities and disallowed. The Tribunal upheld this decision, citing the jurisdiction of the Punjab & Haryana High Court and the absence of detailed expense breakdowns.

7. Disallowance of Reimbursement of Medical Expenses for Assessment Years 1975-76 and 1976-77:
The ITO disallowed medical expenses under Section 40A(5). The Tribunal, referencing a Special Bench decision, directed the ITO to verify if the payments were reimbursements. If so, they should not be included under Section 40A(5).

8. Disallowance of Car Expenses under Section 40(5) for the Assessment Year 1976-77:
The ITO disallowed car expenses for certain employees. The Tribunal directed that the perquisite value assessed in the hands of employees should be the limit for disallowance, and the ITO was instructed to recompute accordingly.

9. Disallowance of Various Small Expenses:
The assessee decided not to press the ground of appeal for small expenses, which included donations and payments to employees, as the amounts involved were petty. The Tribunal dismissed this ground as not pressed.

Conclusion:
The appeal was partly allowed, with specific directions provided for each issue to ensure compliance with legal provisions and precedents.

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