1994 (9) TMI 131 - AT - Income Tax

Issues Involved:

1. Deduction for "provision for leave encashment"
2. Taxation of credit balances written back
3. Deduction for sales-tax liability
4. Deduction for surtax payable
5. Deduction for advertisement and publicity expenses
6. Disallowance of "Rest House Expenses"
7. Perquisites on account of use of cars by directors
8. Deduction for Nepal Project expenses
9. Levy of interest under ss. 139(8) and 215
10. Addition of provisions for purchase tax written back
11. Deduction for additional sales-tax liability
12. Fees to counsel for appearance before CBDT
13. Deduction for consultancy fees
14. Deduction for Kirtan and Pooja expenses
15. Disallowance of various business expenses
16. Deduction for effluent drainage scheme expenses
17. Deduction for repairs expenses
18. Deduction for bad debts and trading losses
19. Disallowance of depreciation on empty bottles and wooden shells
20. Depreciation on items costing less than Rs. 750

Detailed Analysis:

1. Deduction for "provision for leave encashment":
The assessee's claim for deduction was rejected by the ITO and upheld by the CIT(A) on the grounds that it was contingent in nature, referencing the decision of the Hon'ble Calcutta High Court in CIT vs. Bharat General & Textile Industries Ltd. The Tribunal upheld the tax authorities' view following its own prior decision for the assessment year 1982-83.

2. Taxation of credit balances written back:
The ITO subjected Rs. 1,99,457, representing credit balances written back, to tax, which was upheld by the CIT(A). The Tribunal, referencing its prior decision for the assessment year 1982-83, set aside the CIT(A)'s order and deleted the addition.

3. Deduction for sales-tax liability:
The claim for deduction on account of sales-tax liability was not pressed by the assessee and thus rejected.

4. Deduction for surtax payable:
The assessee acknowledged that the issue was concluded against them by the Tribunal's order for the assessment year 1982-83, leading to the rejection of this ground.

5. Deduction for advertisement and publicity expenses:
The Tribunal upheld the disallowance of Rs. 43,200 under the head "advertisement and publicity," following its earlier decision for the assessment year 1982-83. For the second part of the claim, the Tribunal allowed a 25% deduction, increasing from the prior 10%, based on the participation of employees and directors, considering various cited decisions.

6. Disallowance of "Rest House Expenses":
The Tribunal confirmed the disallowance of depreciation and repairs to buildings, referencing its prior decisions. However, for the cost of provisions, it directed the ITO to allow relief as per the Tribunal's earlier order for the assessment years 1979-80 and 1983-84.

7. Perquisites on account of use of cars by directors:
This ground was not pressed and thus rejected.

8. Deduction for Nepal Project expenses:
The Tribunal allowed the deduction of Rs. 3,10,253, concluding that the expenditure was revenue in nature and incurred in the interest of maintaining good business relationships, rejecting the view that it should be allowed in the assessment year 1985-86.

9. Levy of interest under ss. 139(8) and 215:
The Tribunal directed the ITO to recompute the interest under ss. 139(8) and 215, allowing consequential relief based on the Tribunal's decisions on other grounds.

10. Addition of provisions for purchase tax written back:
The CIT(A) deleted the addition of Rs. 1,23,884, verifying that the amount written back had not been claimed as a deduction in prior years. The Tribunal confirmed this decision.

11. Deduction for additional sales-tax liability:
The CIT(A) allowed the deduction of Rs. 1,20,025 for additional sales-tax, referencing the demand created by the STO and the Supreme Court decision in Kedar Nath Jute Mfg. Co. Ltd. vs. CIT. The Tribunal upheld this decision.

12. Fees to counsel for appearance before CBDT:
The CIT(A) concluded that the payment of Rs. 2,100 was not covered by s. 80VV, a view upheld by the Tribunal.

13. Deduction for consultancy fees:
The CIT(A) accepted the bill as sufficient evidence for the payment of Rs. 6,000 to the assessee's counsel, a decision upheld by the Tribunal.

14. Deduction for Kirtan and Pooja expenses:
The CIT(A) allowed the deduction of Rs. 2,34,953, referencing the Tribunal's earlier decisions in the assessee's own case. The Tribunal confirmed this decision.

15. Disallowance of various business expenses:
The CIT(A) allowed partial relief, disallowing Rs. 78,654 out of Rs. 3,01,979. The Tribunal upheld this decision, noting the lack of contradictory evidence from the Departmental Representative.

16. Deduction for effluent drainage scheme expenses:
The CIT(A) allowed the deduction of Rs. 1,22,969, following the order for the assessment year 1982-83. The Tribunal confirmed this decision.

17. Deduction for repairs expenses:
The CIT(A) allowed the deduction of Rs. 1,65,193, concluding that the expenditure was on repairs and not new construction. The Tribunal upheld this decision.

18. Deduction for bad debts and trading losses:
The CIT(A) allowed the deduction for bad debts and trading losses, verifying that the amounts were not recoverable. The Tribunal confirmed this decision.

19. Disallowance of depreciation on empty bottles and wooden shells:
The CIT(A) allowed the deduction, following the Tribunal's earlier decisions. The Tribunal upheld this decision.

20. Depreciation on items costing less than Rs. 750:
The CIT(A) allowed 100% depreciation on items costing less than Rs. 750, considering them as "plant." The Tribunal confirmed this decision.

Conclusion:
The assessee's appeal was partly allowed, and the Revenue's appeal was dismissed, with the Tribunal providing detailed issue-wise decisions, often referencing prior decisions and relevant case law.

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