1994 (6) TMI 41 - AT - Income Tax

Summary

Issues:
1. Disallowance of entertainment expenses and presents.
2. Disallowance of foreign travel expenses.
3. Computation of disallowance under section 40A(5) for cash payments.
4. Computation of disallowance under section 40A(5) for car expenses.
5. Disallowance under section 40A(3) for cash payments.
6. Treatment of expenses for market survey.
7. Depreciation rate on moulds.

Analysis:

1. The first issue pertains to the disallowance of entertainment expenses and presents. The Tribunal, following previous decisions in the assessee's own case, allowed a deduction of 35% of total entertainment expenditure attributable to employee participation. The Assessing Officer was directed to recalculate the disallowance under section 37(2A) accordingly.

2. The second issue involves the disallowance of foreign travel expenses. The Tribunal deleted the disallowance of foreign travel expenses for the senior business executive's wife, citing a previous decision in the assessee's favor for the assessment year 1984-85.

3. Moving on to the third issue, the computation of disallowance under section 40A(5) for cash payments was contested. The Tribunal directed the Assessing Officer to calculate any disallowance in accordance with the decisions of the Delhi High Court, treating cash allowances as part of salary and not perquisites.

4. The fourth issue concerns the computation of disallowance under section 40A(5) for car expenses. The Tribunal reversed the CIT(A)'s decision and directed the Assessing Officer to calculate the disallowance in line with the Delhi High Court's ruling, considering cash payments for car allowances as part of salary.

5. Next, the issue of disallowance under section 40A(3) for cash payments was addressed. The Tribunal upheld the CIT(A)'s decision to delete the addition, as the payments were covered under a specific rule, and no contravention was found.

6. The treatment of expenses for a market survey was the sixth issue. The Tribunal declined to interfere with the CIT(A)'s decision to allow the deduction as revenue expenditure, based on the purpose of the expenditure and previous legal precedents.

7. Lastly, the issue of depreciation rate on moulds was discussed. The Tribunal upheld the CIT(A)'s decision to allow depreciation at 40%, following a previous decision in the assessee's own case for a different assessment year.

In conclusion, both the assessee's and the Revenue's appeals were partly allowed, with various disallowances being adjusted or deleted based on legal interpretations and precedents.