1998 (8) TMI 123 - AT - Income Tax

2011 (1) TMI 1369 - AT

Issues Involved:
1. Disallowance of loss of Rs. 30,000 claimed by the assessee.
2. Relief allowed on account of addition made under Section 43B of the Act.
3. Relief of Rs. 60,000 allowed on account of research and development expenses.
4. Relief allowed on account of interest disallowed for non-business purposes.
5. Disallowance of loss on chit of Rs. 66,947.
6. Disallowance of Rs. 60,000 made under the head "staff welfare expenses".
7. Disallowance of Rs. 56,730 on account of repair and maintenance expenses.
8. Disallowance of Rs. 15,144 made under the head "Foreign travelling expenses".

Issue-wise Detailed Analysis:

1. Disallowance of loss of Rs. 30,000 claimed by the assessee:
The assessee claimed a loss of Rs. 30,000 due to theft while the money was being transported to the bank. The AO disallowed the claim on the grounds of lack of evidence regarding the purpose of the money, unresolved police complaint, and the loss not being incurred in the course of business. The CIT(A) allowed the claim, distinguishing it from the Madhya Pradesh High Court decision in CIT vs. Durga Jewellers by referring to the Allahabad High Court decision in CIT vs. Sarya Sugar Mills (P) Ltd. The Tribunal upheld the CIT(A)'s decision, stating that the loss was incidental to the business and allowable in the year it was claimed.

2. Relief allowed on account of addition made under Section 43B of the Act:
The AO disallowed the claim under Section 43B due to the absence of necessary challans and the amount not being debited to the P&L account. The CIT(A) allowed the relief for the amount deposited by the assessee, Rs. 25,001. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court decision in Allied Motors (P) Ltd. vs. CIT, and noting no material was presented to counter the CIT(A)'s findings.

3. Relief of Rs. 60,000 allowed on account of research and development expenses:
The AO disallowed Rs. 1,21,020 of the claimed Rs. 1,38,128 for lack of evidence and relevance to the assessee's business. The CIT(A) allowed Rs. 60,000 for market survey expenses but disallowed other amounts for unrelated business activities. The Tribunal found insufficient evidence to support the claim that the expenses were related to the assessee's business and remanded the issue back to the AO for reconsideration with proper evidence.

4. Relief allowed on account of interest disallowed for non-business purposes:
The AO disallowed Rs. 1,72,370 of interest claimed for non-business purposes, while the CIT(A) linked specific advances to specific purposes, disallowing interest only where it was not shown to be for business purposes. The Tribunal upheld the CIT(A)'s decision, noting the specific findings and lack of contrary evidence.

5. Disallowance of loss on chit of Rs. 66,947:
The AO and CIT(A) disallowed the chit fund loss, citing it was not part of the assessee's business. The Tribunal referenced a beneficial circular and the Andhra Pradesh High Court decision in CIT vs. Kovur Textile Co. to allow the loss, noting the funds were used for business purposes.

6. Disallowance of Rs. 60,000 made under the head "staff welfare expenses":
The AO disallowed Rs. 60,000 of the claimed Rs. 1,02,998 for being entertainment expenses. The CIT(A) confirmed this. The Tribunal reviewed the details and reduced the disallowance to Rs. 50,000, allowing a relief of Rs. 10,000.

7. Disallowance of Rs. 56,730 on account of repair and maintenance expenses:
The AO treated certain repair and maintenance expenses as capital in nature, disallowing Rs. 1,03,830. The CIT(A) allowed some relief but upheld Rs. 56,730. The Tribunal found the expenses were revenue in nature and allowable, directing the AO to allow the relief.

8. Disallowance of Rs. 15,144 made under the head "Foreign travelling expenses":
The AO disallowed Rs. 15,144 for foreign travel expenses related to setting up a new plant, which was not in the line of the assessee's business. The CIT(A) confirmed this. The Tribunal upheld the disallowance, noting the travel was not for business expansion and one traveler was not an employee.

Conclusion:
Both appeals are partly allowed, with specific directions and remands provided for further consideration and evidence.

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