1991 (11) TMI 113 - AT - Income Tax

Summary

Issues:
1. Trading addition of Rs. 20,600
2. Disallowance of car expenses
3. Disallowance of car depreciation

Trading Addition of Rs. 20,600:
The appeal was against the addition of Rs. 20,600 to the assessee's income for the assessment year 1983-84. The issue arose from the sale of goods worth Rs. 2,86,206 to a partner at cost without charging any profit. The Income Tax Officer (ITO) estimated a profit of Rs. 20,600 that could have been earned by the assessee. The CIT(A) upheld the addition, citing the need to value stock-in-trade at market rates on dissolution of a firm. The assessee argued that no income arose from the transfer as it was in line with the dissolution deed and no profit was divided among partners. The Tribunal found the ITO lacked evidence to support the profit estimation and deleted the Rs. 20,600 addition, noting the genuine reasons for selling goods at cost on dissolution.

Disallowance of Car Expenses:
The assessee contested the disallowance of Rs. 1,039, being 1/4th of car expenses totaling Rs. 4,156. The firm had four partners, and the non-business use of the car could not be ruled out. The Tribunal upheld the disallowance, considering the possibility of personal use of the car by partners.

Disallowance of Car Depreciation:
Another grievance was the disallowance of 1/4th of car depreciation claimed at Rs. 15,467, amounting to Rs. 1,000. This disallowance was linked to the car expenses issue and was confirmed by the Tribunal.

In conclusion, the appeal was partly allowed, with the Tribunal deleting the trading addition of Rs. 20,600 but upholding the disallowances related to car expenses and car depreciation.